Research On The Influence Of Real Effective Exchange Rate On Sino-Japanese Trade Commodity Structure

Since reform and opening-up, the bilateral trade has developed rapidly between China and Japan. The volume of trade increased from 9.2 billion dollars n 1980 to 266.8 billion dollars in 2008. During this expansion, the commodities which held dominant position in trade structure have changed from primary products to manufactured goods. At the same time, the real effective exchange rate of RMB has been floating constantly, which showed different trends being marked with exchange rate system reform in 1994. The research about how the movement of real effective exchange rate impacts on Sino-Japan trade commodity structure is an increasing concern. In this thesis, based on non-neutral theory about exchange rate, we analyze this influence as a view of resource allocation point to provide references for further study.This paper is divided into five parts with the main themes of each part as follows:The first part is introduction including the background, values, related concepts, innovations and difficulties. The second part focuses on the theory study and literature review. It reviews some theories about exchange rate and trade in the part of theory study. Then the literature review contains abroad and home literatures focusing on the relationship between exchange rate and trade, and then summarizes the merits and shorts. The third part is the main body of the thesis. First it expounds the non-neutral theory of exchange rate as a start point of the following analysis. By analyzing from resource allocation point, it concludes that different proportion of import inputs in various products is the principle cause that exchange rate changes trade commodity structure. The exchange rate affects the market price of various products by altering their relative cost, and then reallocates resource through price mechanism to change the structure of production and trade at last. Then, we review the developing process both real effective exchange rate of RMB and Sino-Japanese bilateral trade after reform and opening-up. It concludes that the depreciation of RMB real effective exchange rate before 1994 promoted the upgrading of dominant products in Sino-Japanese bilateral trade from primary products to manufactured goods, while the appreciation after 1994 advanced the development of dominant products from labor-intensive commodities to capital-intensive commodities. In the fourth section, we built econometric model in order to analyze quantification ally the degree that real effective exchange rate of RMB influences Sino-Japanese trade commodity structure by calculating the import and export flexibility of commodities divided into nine categories as SITC. Then the last part confirms the conclusion of this thesis and provides suggestions to the question founded before.