Study On The Influence Of RMB Exchange Rate On China’s Outward Foreign Direct Investment

As economic continues to increase since China’s reform and opening up, China’sOFDI (Outward Foreign Direct Investment) has occupied a more important position inthe world market with the drive of the "Go out" policy, and China’s OFDI has becomean effective measure to enhance the international competitiveness for Chineseenterprises. RMB has continued to face appreciation pressures since the RMB reformon July21,2005, and the influence of exchange rate to China’s economic also havepresented uncertainty. Therefore, Study on the influence of RMB exchange ratefluctuation to China’s OFDI is of great significance.In this paper, on the basis of the analysis of related literatures at home and abroadabout the influence of exchange rate fluctuation to OFDI, theoretical analyses on theinfluence of exchange rate fluctuation to OFDI were conducted form the perspectiveof static, dynamic and construction. And then, the development history of RMBexchange rate and China’s OFDI was analyzed, the statistical description of thecorrelation between China’s OFDI and exchange rate fluctuation was given. Next,based on the monthly real effective exchange rate data and the overall traffic data ofChina’s OFDI in1994-2012, the fluctuation of the exchange rate was calculated withthe help of the GARCH model, and positive analysis on the influence of RMBexchange rate fluctuation to China’s OFDI was given by using stationary test,co-integration test, causality test, impulse response function and error correctionmodel. In the end, empirical analysis of the influence of RMB exchange ratefluctuation to the structure of China’s OFDI was researched from the perspective ofcost-oriented OFDI and market-oriented OFDI.Results of the positive analysis show that the RMB exchange rate will have aneffect on China’s OFDI in the long term, no matter the exchange rate remains level orfluctuant. The appreciation of the RMB leads to the increase of China’s OFDI, and asthe amplitude of exchange rate fluctuation increases, China’s OFDI decreases.However, the RMB exchange rate fluctuation has no marked impact on China’s OFDIin a short time. Results of the empirical analysis show that the RMB exchange ratefluctuation has also influence on the structure of OFDI. In the context of RMBappreciation, China’s OFDI are mainly cost-oriented. Investors prefer to invest in arearich in natural resources and labor resource, and industries they invest are mainlylabor concentrated industries. Besides, the investment subjects and investment ways become more diverse. In general, the exchange rate fluctuation has a positive impacton China’s OFDI. Finally, on the basis of results of positive analysis and empiricalanalysis, some proposals were given for the development of China’s OFDI in thecontext of RMB appreciation.