Based on the monthly data of foreign direct investment (FDI) in China and the index of real effective exchange rate (REER) of RMB during Jan 1997 to Sep 2012, we develop a statistical model in this paper to test the impact of changes in exchange rate in the host country on FDI, with reference to international and domestic research. According to the results of the empirical test, the appreciation of RMB promotes FDI after the reforms in the exchange rate regime in 2005 and this phenomenon is a result from the change in the type of FDI into China in recent years. In the long term, the proper appreciation of RMB and a more flexible exchange rate regime will impact on China's currency and micro-control policies positively.

Recommended Citation

Jin, W., & Zang, Q. (2013). Impact of change in exchange rate on foreign direct investment: evidence from China. Lingnan Journal of Banking, Finance and Economics, 4. Retrieved from http://commons.ln.edu.hk/ljbfe/vol4/iss1/1