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RMB real effective exchange rate of China 's import and export trade

Author: XiaMing
Tutor: WangZengZhong
School: Shanghai Normal University
Course: National Economics
Keywords: Real Exchange Rate of RMB Import and Export Trade Trade Balance
CLC: F752.6
Type: Master's thesis
Year: 2011
Downloads: 193
Quote: 0
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Abstract


With the constant deepening of China’s reform and opening up and join in WTO, China’s import and export trade continued to develop. It also causes a problem that china’s economic development becomes more and more deeply depending on export. China’s dependence on foreign trade also grows fast. In early 2009,struck by financial crisis ,china’s export sharply declined. The direct consequence was that GDP only increased 6.6% in the first quarter. This reflects the importance of import and export trade on china’s economy. It has become an important issue about RMB exchange rates effects on china’s foreign trade. This paper use cointegration analysis, impulse functions, and method of variance decomposition to analyze the relationship among RMB exchange rate, china’s import and export trade and trade balance between china and the U.S.. On the basis of empirical analysis, it will give recommendations about the methods of dealing sino-America trade surplus problem and RMB exchange rate appreciation.Through empirical analysis, it is found that RMB real exchange rate appreciation would have negative effects on china’s import and export at the same time. We can contribute the result to processing trade which is china’s important trade means. Due to processing trade, the decline of export will cause the decline of import. We can test Marshall-lerner condition by the exchange rate elasticities of import and export which one’s sum is smaller than one, so the Marshall-lerner condition does not hold.The cointegration analysis on RMB exchange rate and sino-America trade balance, has the result that the appreciation of RMB can not resolve trade imbalance between china and U.S.. This is in accord with the fact that sino-America trade imbalance worsens after 2005.This strongly rebuts the claim that the undervalue of RMB exchange rate results china’s huge trade balance. Empirical analysis shows that U.S. demand is the key factor which affects the sino-America trade balance. China has a complementary trade structure with U.S.. Due to America’s restriction on export, U.S. can not export high-tech production which it has advantage, so china’s demand has also been confined. At last we test the J curve effect on sino-America trade balance through impulse function. The J curve effect does not exist.According to empirical analysis, this paper finds that the RMB exchange rate has remarkable effects on china foreign trade. We should handle the exchange rate problem carefully ,because it may hurt the economic growth. The conclusion is that we can not solve the trade balance problem through adjusting exchange rate. We should find the ideal solution from other areas such as domestic demand and industrial structure.

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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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