Rmb Appreciation On China's Agricultural Trade Impact Analysis

Agriculture is the foundation to build the country. China is one of the oldest agricultural countries, holding largest proportion of agricultural population. Comparing to the other industries, agricultural trade takes only quite limit share in total merchandise trade currently in China, no one can ignore the its importance. On the contrary, agriculture trade in each country is considered as issue of development strategy. Thus, no matter how less the share of agriculture trade is, it still remains top priority. On 21st of July,2005, Chinese central bank announced that the reform of the RMB exchange rate regime is launched. Since then, China has adopted a managed-float currency system under which the RMB's value was linked to a basket of currencies. Meanwhile, RMB is facing the pressure of RMB appreciation, which may impact the international trade negatively according to the theory of demand elasticity. This research focuses on the impact of RMB appreciation on the agricultural trade. What should be noticed is that the impact could not be in single direction:on one hand, appreciation of RMB is good for import rather than export which may also go against improving the condition of trade and even affects the development of agricultural industry negatively and income level of farmers who are engaged in agricultural production; on the other hand, appreciation of RMB may mitigate the trade conflict and help to import production technique and production facility from other countries in the world.There are five parts in this thesis. The main part includes general analysis, theoretical analysis and positive analysis, which combine to analyze the whole changing trend of RMB exchange rate and impact of which on agricultural trade. The data of both RMB exchange rate and value of trade for positive analysis are collected from the 1st quarter of 2005 to 2nd quarter of 2010. The result shows that in short term, RMB exchange rate doesn't impact the agriculture trade significantly. This thesis will offer policy proposals to Chinese government and suggestions to the agriculture producers.