An Empirical Study on the Impact of RMB Exchange Rate Fluctuation on China's Outward Foreign Direct Investment—Based on Panel Data of 58 Countries along the “Belt and Road”

Abstract

Since China first proposed the "The Belt and Road" Initiative in 2013, countries along the "The Belt and Road Initiative" route have gradually developed into important partners for China’s "going global" strategy and regional cooperation. This paper constructs a two-way fixed-effects model based on panel data from 58 countries along the "The Belt and Road Initiative" route from 2010 to 2020 and conducts empirical tests to further analyze how fluctuations in the RMB exchange rate affect China’s OFDI. The results show that RMB appreciation promotes China’s OFDI, while RMB exchange rate fluctuations suppress it, and the effects of these two factors are heterogeneous across regions, income levels, and distances between countries. To promote the high-quality development of the "The Belt and Road Initiative" initiative, this article proposes feasible recommendations: At the national level, policy communication and coordination with high-income and low- and middle-income "The Belt and Road Initiative" countries in Central and Southeast Asia should be strengthened, the RMB exchange rate system should be improved, and exchange rate fluctuations should be reduced. At the enterprise level, enterprises should enhance their ability to cope with exchange rate risks, leverage the "The Belt and Road Initiative" investment preferential policies, optimize investment layout in "The Belt and Road Initiative" countries in South Asia and Central and Eastern Europe, and actively expand investment areas.