An Empirical Study of the Impact of the Change in Real Effective Exchange Rate on China\u27s Inflow of Foreign Direct Investment

With the development of worldwide economic and globalization, China plays an important role in international trade. Since the reform and openness and five years\u27 plan , China’s economy became the second largest in the world. During the period of economic development, Foreign Direct Investment became an important part of improving market socialism in China. In this paper, I use monthly data on foreign direct investment (FDI) in China and the index of real effective exchange rate (REER) of the Chinese RMB for the period from Jan 2008 to Nov 2017. I develop a statistical model to test the causality between FDI and REER in order to make reasonable recommendations based on the research findings from the perspective of the Chinese government