Template-type: ReDIF-Paper 1.0
Author-Name: Yuqing Xing
Author-Name-First: Yuqing
Author-Name-Last: Xing
Author-Workplace-Name: International University of University
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Title: Why is China so Attractive for FDI The Role of Exchange Rates
Abstract: This 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.
Classification-JEL: F23, F31, O53
Length: 29 pages
Creation-Date: 2004-03
Number: EMS_2004_04
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2004_04.pdf
File-Format: Application/pdf
File-Function: First version, 2004
File-Size: 210KB
Keywords: FDI, Exchange Rate, Manufacturing
Handle: RePEc:iuj:wpaper:EMS_2004_04