Study Of RMB Exchangerate Fluctuation Effect On China’s Outward Direct Investment

With the development of globalization,Chinese economy is in rapid progress in the world. Relying on reform to promote the development,the government encourages Chinese enterprises to carry out the activities of outward direct investment,it makes Chinese enterprises continue to hone in on the international market and strengthen the competitiveness of the foreign direct investment in the world.Therefore the China can have a place to live in in the world. China’s outward direct investment is developing,at the same time, depend on the domestic and foreign situation the RMB also continuously reforms.Especially after the exchange rate reform in2005,due to international trade balance and increasing foreign reserves,RMB faced upward pressure. RMB influences outward direct investment in China in a certain.On the one hand,the RMB’s appreciation will increase the investment of Chinese enterprises in foreign countries,meanwhile investment amount is increasing;conversely development of China’s outward direct investment will stimulate the appreciation of the RMB exchange rate,between of them have a positive interactive relationship.Relying on the development of domestic and international markets,it learns from the research results of scholars at home and aboard on between exchange rate and outward direct investment and tries to explain the relationships of them.At first,this paper analyzes theoretical basis of the exchange rate’s change and fluctuation effect on international direct investment. With the analysis of the history of china’s outward direct investment,this paper finds the development of china’s OFDI also have some problem,for example,small market,centralized distribution of regional investment and so on.RMB exchange rate effects on the four facts:location,industrial structure,investors and investing ways.This paper uses foreign direct investment of china to10other countries (developed countries and BRICS)data for the period from2003to2011,then by using panel model makes an empirical analysis.The results shows that the RMB exchange rate level and volatility are remarkable factors which influence the Chinese outward direct investment.That is,when RMB’s appreciation will lead to a large sum of China’s OFDI,between of them have a positive relationship.A volatile exchange rate of RMB would encourage China to increase outward direct investment in developed countries,but in contrary,reducing the number in the BRICES.Finally,based on the relationship of RMB’s exchange rate and China’s OFDI,this paper proposes some policies and suggestions for china’s outward direct investment.