| After joining the WTO,China's foreign trade has rapidly grown while the trade surplus has increased year by year.The statistics released by the People's Bank of China showed that,China's total import and export value hit US$21738.3,up by 23.5%year on year,with a trade surplus of US$2622.0,up by 47.7%.At the same time,China's foreign exchange reserve hit US$15280.Accompanying with the frequent foreign friction,the disequilibrium of external economy becomes the main factor which affects the results of macro-control and leads to the inflation.In such a background,China is facing a unparalleled upward pressure on the CNY(exchange rate).On July 21st 2005,the People's Bank of China announced to adopt a more flexible exchange rate of CNY.Until the end of 2007,the exchange rate of CNY had increased 8.8%while the disequilibrium in the foreign trade didn't improved. Evaluating the impacts of CNY exchange rate's fluctuation on China's trade balance and trade surplus would have significant theoretical and practical meaning in a long term.Picking Japan and U.S.A,which are most important trade friends and main import source and main export market respectively,as the research objects,this paper examines he impacts of CNY exchange rate's fluctuation on China's trade balance after joining the WTO by applying approaches of the analysis of co-integration and the variance Decomposition.By empirical analysis and experience study,the appreciation of the RMB exchange rate has little effect on China's trade surplus. Expanding the domestic demand and changing the mode of economic growth to reduce trade surplus is the only way.Firstly,this paper reviews relevant classic theories,especially introduces the Elasticity Approach and the Imperfect Substitute Approach.Then the relevant literature on the domestic is sorted out.In this part,literatures are examined form the angles of elasticity approach and other approaches.After cooperation,I found that it's difficult to achieve credible consequence by directly measuring the Marshall-Lerner coefficient.As a result,I decide to establish a statistic model on the imperfect substitute model to study the relationship of exchange rate and the foreign trade. Finally his paper makes comments and gives some suggestion on the basis of above analysis.This research is based on the imperfect substitute model created by A.K.Rose (1991) and by applying approaches of the analysis of co-integration and the variance decomposition,the paper examines the influence of all possible factors,such as foreign exchange rates,foreign demand and domestic demand,to the international balance.Through the research,I find that there is a stable one-way relationship between foreign exchange rates and trade balance which means that exchange rate's fluctuation was effected by the trade balance but not vice versa.Today Sino-American and Sino-Japanese trade balance are depended on un-exchange rate factors such as domestic income,economic structure and so on.In the long term,it is China's domestic demand which is the main reason of the alteration of trade balance between China and U.S.A.However,demands from China and Japan both determine the Sino-Japanese trade balance no matter in the short or long term.It's impossible to solve the disequilibrium of trade balance merely depending on the appreciation of CNY. |
