The role of the exchange rate in China’s outward foreign direct investment

Ding,Xinyun;Salike,Nimesh

[Ding,Xinyun] Xi'an Jiaotong-Liverpool University,Suzhou,China [Salike,Nimesh] Xi'an Jiaotong-Liverpool University,Suzhou,China

The State of China's State Capitalism: Evidence of Its Successes and Pitfalls

DOI:10.1007/978-981-13-0983-0_11

Publication Year:2018

Document Type:BOOK

Identifier:http://hdl.handle.net/20.500.12791/002057

Abstract

This research estimates the impact of exchange rate and exchange rate volatility on Chinese outward foreign direct investments (OFDI) utilizing panel data in 21 countries from 2004 to 2013. A basic gravity model and fixed effect model are applied to find that both market-seeking motivation and economic openness are positive determinants for Chinese OFDI. A depreciated host country currency is more favorable for Chinese OFDI. On the contrary, exchange rate volatility has adverse effects, meaning Chinese OFDI declines with exchange rate volatility. There is no obvious evidence to support that China has a preference to choose developed or developing countries as its OFDI host countries.

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