Research On RMB's Exchange Rate Changes And Influence On Sino-European Trade

With the continuous economic globalization, international trade has become an important component of national economies. All the worlds are striving to develop the economy, china and EU went through 40 years effort to develop economy and made success. Now, EU became the biggest exports partner, China has became EU's largest import market, and the two sides formed an important strategic partnership. International trades have played a very important role on the optimal allocation of resources. EU enterprises have sufficient funds to support a higher level of technology and good management. In contrast, although quite lacking in these areas, but with China's low labor costs and good investment environment to attract, China is still the traditional comparative advantage to attract European companies to invest in China, an important reason. Financial crisis made a big impact on the world, many economizes are facing recession and consumer downturn. China and the EU are facing new challenges and opportunities. This paper analysis the influencing process and mechanism of exchange rate changes on trade balance from both exchange rates pass-through and Marshall-Lerner conditions. Because the influences of exchange rate change the prices of goods is incomplete and in different goods. And the changes of RMB exchange rate changes on the price of goods is in complete, and in different goods and different trade partner.This paper chose the china with EU trade as the study object to discuss the change of exchange rate influence the trade relations, and give some suggestions to resolve the question. It will be combine the way of qualitative and quantitative to analysis the influence of RMB exchange rate change to trade, and use of data, charts and statistics. To learn clearly the theory of the influence of the exchange rate and the term of trade, at the third chapter it be given a minute description. The theory mainly introduced the impact of the fluctuation in exchange rate upon commence, and from the theory of mercantilism to flexible analysis law, Purchasing Power Parity, and term of trade theory. Adam Smith believes that the exchange rate have regulation to the import and export, higher exchange rate must lead to higher tax. Because of it leads to foreign currency are more expensive and decrease needs. So the higher exchange rate will decrease trade deficits and did not increase. The theory of the relation between exchange rate and term of trade is Elasticity theory; it is developed by the economists from the University of Cambridge based on the microeconomic analysis methods and the local analysis. It is mainly care about the influence of currency to trade and terms of trade, and basis on elastic theory, the collapse of the gold standard after the floating exchange rate system adopted by countries in the context of the devaluation on the terms of trade effects and the improvement of the trade deficit. Under the premise of the law of one price is established, purchasing power parity include the absolute purchasing power parity and relative purchasing power parity. Because of the terms of trade reflect the interest distribution that emerges from international trade.And the terms of trade directly reflect the actual resources flow and improve the actual benefit. In this paper, the theory of exchange rate is based on the incomplete delivery of the price on the exchange rate transfer theory. The processes of exchange rate change transmit to import and export prices of goods are continuous. When the price fluctuant, exporters in the market structure of imperfect competition, the price is the purpose of profit will be adjusted to reflect the import price is an incomplete pass. And this incomplete transfer involved on the adjust speed and balance of payment effects, monetary policy implementation, and the product trade competitiveness. The real appreciation of RMB will reduce china's attraction for FDI; the fixed non-observation effect such as the similar culture, similarity in the ethnic, political factors, economic policy, and latent risk and so on has the important influence on FDI inflows; the export-oriented FDI has been dominant in china.After learning the development process of china-EU trade, the paper describes the development of Sino-EU trade, by viewing the course of development of the EU's direct investment in china and summarizing periodical change of the Sino-EU trade this study clarifies the trade between china and EU has great complementarities and development potential, In the different mode of economic growth the impact of the economic growth on the terms of trade is different. The basic meaning of the terms of trade were sorted and analyzed about the impacts from the FDI, trade and the economic growth. As the development of international trade, the relationship become increasingly close, and in-depth analysis on the relationship between them is what we must do in developing countries. It is not a simple process of the continuing reform of the RMB exchange rate policy on trade relation between china and Europe. Tradable and non-traded goods relative price distortions due to exchange rate undervalued, therefore trading goods prices were overvalued. In this time, the resource flow to the non traded goods department. Under the premise of the stability of RMB against the U.S dollar, the appreciation of the RMB against the euro will weakened further against the European country the price of competitiveness of export products. Exchange rate pass a fundamental change in the exchange rate is the business in the face of pricing strategy when a choice made, which is closely linked to corporate pricing strategy. Changes in exchange rates will choose to purchase the number of countries and have a huge impact. Because when the exchange rate is undervalued, the same raw material prices in the international market will be higher than domestic prices. RMB exchange rate and asset prices not only affect the price of international market prices, the last of the RMB exchange rate fluctuations on the impact of terms of trade.What is gratifying is that the impact of our NBTT's deterioration and fluctuations on the economic growth is not significant. On this point, our country is different from many other developing countries, mainly because over the years our country has maintained rapid economic growth. From the viewpoint of economic growth, we can see the deterioration of NBTT as the cost of growth, and this cost is still at least within this scope we can take. This also need us as soon as possible to perfect the market economic system, speed up scientific and technological progress and independent innovation, improve the government's macro-economic management capacity, it is the only way to achieve the goal of catching up, and to achieve long term goal as soon as possible.