The Impact Of RMB Exchange Rate's Changes On China's Foreign Trade

Exchange rate is the most important comprehensive price index used in international economy transaction and executes the function of transforming price .It becomes the most important lever to regulate trade balance . Exchange rate' changes deeply influence trade balance and domestic economic. After the implementation of reform and opening policy, the fluctuation of RMB exchange rate has promoted Chinese export trade and improved Chinese trade balance.The paper studies the relationship between RMB exchange rate and trade balance, based on the theory of exchange rate trade effects, and employing Co-integration Theory, combining Chinese empirical survey to illustrate the influence of the real exchange rate fluctuation of RMB on the trade balance and trade structure of China, thus put forward the relative policy recommendation based on the above analysis. Many scholars have made a lot research about the impact of exchange rate's changes on trade balance .Most of them studied about the relationship between exchange rate and the gross trade volume. Based on the former study results, I will respectively study the relationship between RMB exchange rate and China's trade balance of industry products and primary products. Analysis results are as following: Firstly, the demand elasticity of China's industry products and primary products all conforms to the Marshall-lerner condition, which proved that RMB real effective exchange rate changes could influence the trade volume of China's industry products and primary products. Secondly, China's trade structure and RMB real effective exchange rate have long Co-integration relationship, and RMB real effective exchange rate is the Granger cause of trade structure. This could explain the cause of the change of RMB real effective exchange rate at some extent.Finally, I will entirely evaluate the impact of RMB exchange rate's changes on China's foreign trade, the put forward the relative policy recommendation about how to release the pressure of RMB appreciation and response to exchange rate's change. At the present time, RMB exchange rate is in the condition of continual appreciation. We should enlarge domestic demand and reduce the dependence to the trade, optimize the domestic industry structure, promote the foreign trade structure, reduce the risk foreign trade risk, make full use of the reserve of foreign trade, and combine fiscal policy, monetary policy and exchange rate policy at the same time.