| Abstract | Based on the analysis of synergy effects of real exchange rate and structure upgrade on the utilization of manufacturing foreign capital in China, this study uses a panel dataset covering 98 countries, where China had traded and invested during 2003—13. A generalized method of moments(GMM) is adopted for our econometric models according to an established dynamic simultaneous equations including real exchange rate, high-technology manufacturing export and manufacturing FDI. The empirical results show real exchange rate mechanism and structure mechanism of China’s OFDI have significant effects on the utilization of manufacturing foreign capital in China, but the effect of manufacturing structure upgrading is more obvious and foreign capital of high-end manufacturing can further inflow into China through structure mechanism as China’s OFDI in resource abundant, technology advanced and high-income host countries, particularly that in Europe and North America. After the financial crisis, with the stepped-up implementation of diversification OFDI strategy guided by transformation of manufacturing development pattern, structure mechanism has become the main mode to attract foreign capital to enter China’s manufacturing. As a result, improving the matching degree of OFDI and upgrade of domestic manufacturing industrial structure, and optimizing the structure of foreign capital in manufacturing have become China’s important policy choice to utilize manufacturing foreign capital. |