Why is China so Attractive for FDI The Role of Exchange Rates
AbstractThis paper argues that China's exchange policy plays a critical role in its FDI boom. Yuan's devaluation and the pegging yuan to the dollar policy not only offset the pressure of rising real wage due to sustained economic growth in the last two decades, but also improved China's competitiveness in attracting global FDI. Examining the hypothesis in the context of Japanese FDI in China's nine manufacturing sectors from 1981 to 2001, the paper finds a strong correlation between Japanese direct investment in China and the real bilateral exchange rate between yen and yuan. Empirical evidences strongly suggest that China's exchange rate policy is one of critical factors driving FDI into China.
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Bibliographic InfoPaper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2004_04.
Length: 29 pages
Date of creation: Mar 2004
Date of revision:
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More information through EDIRC
FDI; Exchange Rate; Manufacturing;
Other versions of this item:
- XING, Yuqing, 2006. "Why is China so attractive for FDI? The role of exchange rates," China Economic Review, Elsevier, vol. 17(2), pages 198-209.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F31 - International Economics - - International Finance - - - Foreign Exchange
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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