Stronger RMB won't affect investment much
By Jiang Wei (China Daily)
Updated: 2005-07-26 06:30

The revaluation of China's currency the renminbi, or yuan, is not expected to make a big impact on the flow of foreign direct investment (FDI) into China.

The People's Bank of China unexpectedly announced the lifting of the renmibi's peg to the US dollar and adjusted the exchange rate to 8.11 yuan to one dollar, from the previous 8.28 yuan.

A man looks at an electronic board that show latest foreign exchange rate at a Bank of China branch in Wuxi, East China's Jiangsu Province July 25, 2005. [newsphoto]

"The appreciation of the renminbi will certainly have an effect on the flow of FDI into the country, particularly on investment into fields concerned with exports," said Lu Jinyong, a senior trade researcher with University of International Business and Economics.

As the appreciation makes Chinese goods less competitive in the global marketplace, investors dealing with exports will have to bear higher costs.

"Foreign investors will be more cautious when adding investment to existing projects or launching new projects in China," Lu said.

The slight adjustment of 2 per cent is not expected to have a large impact, but it is still highly relevant to foreign investors.

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