The Appreciation Of The RMB For China To Attract FDI Impact Analysis

Foreign direct investment is an additional financial support for the economic development of a country, and movements of the exchange rate have an effect on the economic development and adjustment of industrial structure of a country through affecting the ability of attracting foreign direct investment. In order to adapt to international financial development, in2005the central bank carried out the reform of the RMB exchange rate, and this increased the flexibility of the RMB exchange rate significantly. The expectation of the RMB’s appreciation is strengthening gradually, and there has been pressure of the RMB’s appreciation in the past few years, not only becauese of the exchange of the RMB against the U.S. dollar is all the way up, but also the real effective exchange rate index in recent years climbs to record highs continually. Scholars in domestic and foreign believe that the changes of the level of a country’s exchange rate will have profound impact on the inflow of foreign capital, and therefore appreciation of the RMB has become an important factor affecting the impact of FDI inflows that can not be ignored.At present, China is facing growing domestic and international imbalances, the U.S. subprime mortgage crisis and the global financial crisis made the slowdown in foreign direct investment worldwide, and it had also brought negative impact for the chinese economy. Therefore,under the macro background of the continuous appreciation of RMB, the research of the RMB exchange rate movements, especially the impact of RMB appreciation on China’s FDI inflows is particularly important.In this paper, a way to combine theoretical and empirical approaches is used, and the different effects of RMB’s appreciation for China to attract FDI inflows are analyzed, and the datas of empirical part mainly from Chinese Statistical Yearbook and relevant government agencies such as the IMF website. The first chapter first introduces the background of this paper and related research methods. The second chapter conducts the work of combing and commentary of the relevant researches. The third chapter analyzes the history and current situation of chinese foreign exchange movements and the development of FDI, and this part does some specialized analysis on the source、geographical distribution and industry distribution of the chinese absorption of FDI:FDI’s resource of chinese absorptiong remains highly concentrated, and manufacturing is still the foreign direct the first choice of investment of the foreign direct investments. As for the choice of the region. the advantage of the eastern regions to attract foreign direct investment remains. The fourth chapter analyzes the mechanism of the exchange rate’s change on the impact of FDI, mainly including competitive effect, the wealth effect, department effect and psychological expectation effect.The fifth chapter is the empirical part of the paper, and its aim is to study the specific correlation between the real exchange rate and chinese FDI inflows from a holistic perspective by stationary test and cointegration test (Cointegration test). Finally, the writer studies the impact of absorbing FDI because of the trend of the RMB’s appreciation in China, and it combines with theoretical analysis and empirical research, then the writer proposes some policy Countermeasures based on former analysis.