Study Of The Impact Of The Rmb Exchange Rate Movements On Import And Export 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.In July 21st 2005, our government began to carry out Managed Floating Exchange Rate which is based on the markets' supply according to a basket of currencies. RMB was floating and demand upward 2%, and adjusted. The complete reform of RMB exchange rate must affect our foreign trade deeply in the future. So the paper observes the influence to our export and import from this certain small adjusting of exchange, and analyzes the negative influence and advantage fuction which the exchange reform takes to our foreign trade industry and enterprises. Then it does researches and works out some devices to deal with the exchange reform.The paper is divided into three parts:The first part mainly says the circumstances of RMB exchange rate reform. Beginning with the theory, it describes exchange, the purchasing power parity, and the relation between the exchange and the foreign trade. The exchange is the most important variable for a country in its international economic activity. Casel Theory of Purchasing Power Parity tells us exchange rate's Hosting relates close to an economy's internal price. To the opposition, the exchange rate's adjusting has a deep influence to its balance of the foreign trade and internal economic activities. The Theory of Elasticity, the Theory of Long Delay, the Absorbing Analysis Method, the Currency Analysis Method, the Theory of In perfect Exchange Transmitting and so on are all classical theories researching on that the exchange rate retroats an economy's development and foreign trade. These theories observe the fuction of exchange rate in different points of view, and have got the final conclusion: The exchange rate movements may affect the trading amount and structure. In the common saying, exchange rate devaluate will be favorate for advancing its own competition of the goods. But if it can improve the trading revenue and expenditure must be restricted by complex factors. Before the exchange rate reform, our government has to be face to the pressure of revaluation from overseas. At the same time, the internal economic situation is crying for a new exchange rate forming system can solve kinds of economic problems. So RMB exchange rate reform may mainly thought of the big business partner countries or areas and their currency in the balance of payments current account of China. Nowadays USA, Euro-area, Japan, Korea are the most business partners of China. And correspondingly US dollar, Euro, Japanese yen, WON also seem to be the main basket currencies. The focal point of this exchange rate adjusting is not whether the exchange rate goes upward or downward, but the reform of the forming system. In a long-term, it is just the beginning of the exchange rate. Our exchange system should develop to the more flexible floating exchange rate in order to realize RMB can exchange freely .From then on, the new system is going well .The regular movement express the rule that the market's supply and demand is the basis and the exchange rate's adjusting is according to the basket currencies. The market respond to RMB exchange rate reform is positive .The anticipation is steady.The second part makes a key discussion on the influences from the adjustment of RMB exchange rate to our import and export. Before the exchange rate reform, our country had a strong tendency of the foreign trading .The way and the structure of trading have a big change. The total quantity of trading grew swiftly and violently. But there are also many problems behind the encouraging numbers. The oversized balance of payment surplus, the low level of export products, the obsolete foreign trading strategy, the foreign trading pressure from the lack of internal demand and so on. So many problems have been puzzling our economy's development continually, healthily and fast. Taking into long-term consideration, carrying on the RMB exchange rate reform this time could be helpful to the solutions of the economic problems. But simultaneously the revaluation of RMB and the undulation rule's change will also have some negative influences to the foreign trade industry and the enterprises. The paper summarizes the shortcomings and the advantages from the exchange rate adjustment and affects of the reform on our foreign trade industry and enterprises through the textile, the electrical appliances, the automobile, the steel, the mechanical and electrical products and so on and the main foreign trade product import and export situation observation and the analysis after the exchange rate reform.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.