Research On The Trade Effect Of RMB's Exchange Rate Change

The RMB's exchange rate change is one of the hot topics in Chinese economy nowadays. The RMB's appreciation has lasted long since July, 2005 and it is widely accepted that the process of revaluation will last for more periods. Zhejiang province plays a significant role in the international trade area, with the total international trade amount reaching 211.17 billion dollars in 2008, while the surplus reached 97.54 billion dollars. The huge trade surplus has been one of the causes which the RMB's revaluation derived from. In turn, the RMB exchange rate's trade and structure Pass-Through effect is also significant. Thereby, doing research in these areas has not only theoretical value but also practical value.This paper is attempt to answer these questions through mathematical and empirical analysis.The mathematical analysis uses the framework which contains the analysis of exchange rate's price Pass-Through (PPT) effect and the Elasticity Approach to clarify the relationship among PPT, quantity Pass-Through (QPT) and volume Pass-Through (VPT). It is showed that: in the trade structure classified by specific criterion, the trade volume of the commodities is determined by the PPT, QPT and VPT. Thus the exchange rate's trade structure Pass-Through effect is achieved.The empirical analysis to Zhejiang shows the following results: 1, The RMB's revaluation will restrain the export trade in Zhejiang. 2, The RMB's revaluation will also restrain the import trade in Zhejiang, it isn't accord with the general economic thoery. 3, The appreciation of RMB's exchange rate has a negative effect to the export of the rural subsidiary occupation products, while it has a positive effect to the high-tech products, the mechanical and electrical products. This result indicates that the appreciation of RMB's exchange rate is propitious to upgrade the structure of export trade. 4, The appreciation of RMB's exchange rate has a positive effect to the import of the rural subsidiary occupation products and the high-tech products, while it has a negative effect to mechanical and electrical products. The reasons for that need to be discussed in greater depth. At last, I try to make some proposals, which may contribute to the stability and development of export and import trade in Zhejiang province.