부산대학교 도서관

The purpose of this paper is to analyze the impact of Chinese yuan appreciation on FDI inflow. Since 1980s many scholars undertook research with the topic of exchange rate impacts on FDI. However, most of the studies focused on the developed countries such as European countries and the United States. This paper focuses on the Chinese case, i.e. the relation of RMB appreciation and FDI inflow in China, and also the data will be updated to the latest ones.On July 21, 2005, China introduced a new currency regime and finished the decade-long fixed exchange rate system of the RMB vis-？vis the US dollar. The authorities not only immediately revalued the official bilateral exchange rate by 2.1 percent from RMB8.28 to RMB8.11 to the US dollar but also announced that the RMB henceforth would be managed ？ith reference to a independent basket of currencies？rather than being pegged to the dollar. Thenceforth, Renminbi exchange rate appreciated consistently and continuously. At the beginning of 2012, the nominal RMB-dollar rate was RMB6.3061, reflecting a cumulative nominal appreciation against the US dollar of 22.1 percent compared with that one in July 21, 2005. Meanwhile China is the largest recipients of foreign direct investment in the world. Foreign direct investment stock in China has grown by 38.67% in one year from February 2011 to February 2012. Even though the Renminbi exchange appreciates consistently, FDI inflow in China doesn？ show the pace during recent years. Therefore, it is meaningful to analyze whether the appreciation of Renminbi will affect the FDI inflow in China and how much it will affect the FDI inflow in China.The paper analyzes the data in empirical tests by ADF unit root test, Engle-Granger co-integration test and Granger causality test. And from the empirical test we find that Renminbi exchange rate in time t makes negative impact on FDI inflow in China, which means Chinese Yuan appreciation in time t will encourage FDI inflow in China. However, Renminbi exchange rate in time t-6 shows positive sign on FDI inflow in China, which means Chinese Yuan appreciation in time t-6 will discourage FDI inflow in China. Based on the empirical test result, we can say that in the foreign direct investment which takes a long time, such as the greenfield ventures, Renminbi exchange rate could make a positive effect on the FDI inflow. However, some foreign investment which takes a short time, such as foreign M&A by bidding, Renminbi appreciation seems to not affect FDI inflow very much and even makes negative impact on FDI inflow. Therefore, we can conclude that Renminbi exchange rate can be seen as a factor that could affect FDI inflow but not the only cause, there are so many important factors that affect FDI inflow other than exchange rates.