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Research on Exchange Rate Fluctuations Effects on China’s Trade Balance and the Proposals of China

Author: YangZuo
Tutor: LiuTieMing
School: Jilin University of Finance and Economics
Course: International Trade
Keywords: trade balance nominal exchange rate fluctuations in real effective exchange rate
CLC: F752.6
Type: Master's thesis
Year: 2010
Downloads: 592
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2009 China’s total trade for the 2.2 trillion U.S. dollars and 20.6 billion dollars in 1978 compared with an increase of 106 times, the trade balance surplus of 196.108 billion U.S. dollars. But the excessive trade surplus is not conducive to attracting foreign direct investment and China’s export trade a good international environment, impact on our economy overall, coordinated and sustainable development. Recalling the RMB exchange rate system reform has been four years, the RMB has appreciated showed accelerated phase, and there is a strong appreciation of the expected self-realization, which undoubtedly will make people think of the actual 7 80 20’s "get on the rocket," the Japanese economy , worried that China has forgotten the bitter lessons of history repeat Japan. This article will focus on the renminbi exchange rate fluctuations on our balance of trade impact of exchange rate fluctuations and by analyzing the links between trade balance, to improve the trade balance in China’s exchange rate policy advice and bold expected.In this paper, the structure is divided into four partsThe first part, from a theoretical point of view, the impact of exchange rate volatility on trade balance a brief review of theoretical development and analysis, to provide a theoretical basis for the following analysis. The paper introduces the analysis of elastic analysis, absorption analysis, currency analysis, and the advantages and disadvantages of each method were discussed.The second part, is RMB exchange rate system in China history and overview of China’s trade balance of trade is analyzed. In reviewing the history of RMB regime, the time-sequence to the center line of the Bretton Woods system was divided into four stages. China’s trade balance with China’s foreign trade orientation in the course of development of the main line, the time for the order, reform and opening up to the line, specifically into the reform and opening up of trade balance, initial stage of China’s foreign trade, foreign trade developed steadily and accelerate the development of foreign trade is divided into four stages by a large number of charts and data analysis and interpretation of certain of our reform and opening up 30 years of achievements, to provide for the following analysis of historical data and experience to draw on.The third part, is to review the exchange rate fluctuations over the years, the balance of trade impact on China, aims to provide experience for the following analysis of existing conditions and reference. First of all, from the perspective of China’s nominal exchange rate of RMB exchange rate fluctuations on our balance of trade impact, it can be concluded that the devaluation of the yuan trade balance in China have more pronounced effect. Then, from the perspective of real effective exchange rate of RMB exchange rate movements on the impact of China’s trade balance can be seen, the RMB real effective exchange rate changes on trade balance effect is less obvious.The fourth part is the focus of this article. First, analysis of the trend since the reform on the RMB has been in the international public opinion and domestic pressure under the effect of a combination of factors, the market’s serious appreciation of the expectations, and have self-fulfilling trend. Gradually increase the pressure of RMB appreciation of the situation, immediately cut into China’s trade balance would change the situation. Although the change in the years following the exchange, RMB appreciation on China’s trade surplus expanded inhibition played a certain role, but because of China’s trade surplus did not reduce the yuan’s appreciation, but continues to expand, and the trend is accelerating . Next, the motivation for China’s trade surplus was analyzed to allow people to understand and treat the right cause of China’s trade surplus continued to cause, mainly in the following three points:First, China’s trade surplus has been seriously exaggerated the Chinese export tax rebate policy to encourage exporters false exports, to encourage importers reported imports. China forged VAT invoice is serious, the case of export tax rebate, the amount is also great, which shows that the export situation is very serious false. In general, importers are under-reporting of imports, since tariffs are mostly based on the price charged by the corresponding ratio. Importers of false reporting of a very strong motive. This is also a common problem encountered by all countries. In addition, both imports and exports are denominated in the way no, exporters way valuation calculated in FOB, CIF means the importing country to pricing, which can lead to the results of the two calculations differ significantly. :Second, China’s trade surplus is the result of the international division of labor began to appear in China trade surplus and has expanded each year, the inevitable result of the global division of labor, and not directly related to the RMB exchange rate policy. China’s processing trade in total trade exceeded the proportion of general trade and the ratio in recent years, the basic sound and fair in previous years. China’s total trade, the foreign-invested enterprises located more than 50%. 2005, 58% of China’s exports are foreign to complete, 51% of the foreign trade surplus is created. Net foreign-invested enterprises, Chinese enterprises in 2005 to create a trade surplus of about only 50 billion dollars.Third, the U.S. dollar standard system and the dollar hegemony as early as the late 60s in the 20th century, against the United States accused the European commitment to the international balance of payments adjustment or the responsibility to address global imbalances, the French president has sharply pointed out: the U.S. dollar hegemony, balance of payments deficit is specific embodiment is the deficit without tears. As a key currency of the issuer and manager of the United States has almost unlimited capacity and financing capacity of the credit, although the huge deficit the United States but the world is still a large-scale purchases of U.S. bonds, and this is the best proof of U.S. dollar credit capacity. The United States has a huge deficit, which is the source of other foreign reserves, the United States must be a steady stream of transportation around the world 4 cents a paper, in order to meet national needs, like the Nixon administration’s finance minister said: "The U.S. dollar is to be your own, and do not force you to the "remark how arrogant, domineering behind strong U.S. economic strength and infinite cost almost 0 small pieces of paper and strong financial backing.Finally, seven of Japan in the 20th century a significant rapid appreciation of the eighties the painful lessons of history is worth our reference, and finally summed up in the conclusion to be rational view of the RMB’s appreciation, not forced by outside pressure to force the appreciation of industrial structure adjustment policies, and venturing to the U.S. dollar idea of decoupling of the RMB exchange rate reform.In summary, the new RMB exchange rate movements due to various factors, to improve the trade balance did not play the role of exchange rate reform should be. To this end, I propose the following four proposals: First, trade development strategies, promoting trade policies and growth patterns; second, to expand domestic demand is a path, the promotion of trade goods and non-balanced development of trade in goods; Thirdly, the policy-oriented role, accelerate innovation system; Fourth, attention to new trends in trade protection policies, and actively respond to trade friction.

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CLC: > Economic > Trade and Economic > States foreign trade > China's foreign trade > Import and Export Trade Overview
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