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International controversy surrounding the Chinese exchange rate regime implies far-reaching impacts of policy decisions. Little empirical research on the aggregate level has been conducted on the impact of exchange rates on FDI. Here, I explore this relationship using data annual inward Chinese FDI data between 1992 and 2006. The general findings show no clear correlation between real exchange ... read morerates and foreign direct investment as explored by source country and by sector. This is primarily due to the numerous factors in investment decision-making such as a long time horizon and high-fixed costs. In order to conduct further analysis into the topic, it would be most useful to use firm-level data segregated by source country and/or sector and investigate the fixed and variable cost structures within each firm.read less
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