Study On The Relationship Between The RMB Exchange Rate And Sino-U.S Trade Imbalance

Since the Reform and Opening-up. Sino-U.S trade relations has made great progress. Until2010, Sino-U.S trade has increased185times in30years, trade volume reached to385.385billion dollar. Meanwhile, Sino-U.S trade surplus is becoming a serious problem, China’s trade surplus in2010reached to181.3billion dollar (U.S statistics for273.07billion dollar),17years grew28times. Expansion of the Sino-U.S trade surplus, becomes an important barrier to the influence relationship of Sino-U.S classics trade sustainable healthy development. The United States and other western countries have accused the Chinese exchange rate system and policy of the arch-criminal of the Sino-U.S trade imbalance, continue to put pressure on China to revalue its currency.In fact, since the1994start of the RMB exchange rate reform, especially after the second time, the value of the RMB rises ceaselessly. Until2010. the revaluation of the RMB have been as high as20%, the exchange rate level dropped all the way from8.7to6.7, it should be said that China has made great efforts on the market-oriented reform of RMB exchange rateTherefore, on one hand, the RMB exchange rate reform is deepening ceaselessly, the value of the RMB also is in ceaseless promotion; on the other hand, Sino-U.S trade surplus has not been narrowed, but shows a growing trend. From the visual point of view,It is obviously biased that attributing the Sino-U.S trade surplus to RMB exchange rate., requests further appreciation of the RMB according to it. It is apparently too arbitrary that revaluation of the RMB will solve the worsening of Sino-US trade imbalance.This paper is dedicated to an empirical test of the relationship between Sino-U.S trade surplus and RMB exchange rate, tries to prove that the RMB exchange rate is not the main reason for Sino-U.S trade surplus expansion and provide quantitative evidence that the United States to reduce Sino-US trade surplus as a reason for the appreciation of the RMB’s view is unfounded; at the same time, puts forward reasonable policy and suggestions to narrow Sino-U.S trade surplus by analyzing and summarizing the social, economic and statistical factors lead to China’s trade surplus. This paper summarizes previous theories and empirical studies on exchange rate and balance of international payments firstly, then, reviews RMB exchange rate system reform and the history and current situation of Sino-U.S trade relations. Thirdly, using the Sino-U.S trade and RMB real exchange rate data, establishes time-series econometric models to inspection of the relationship between Sino-U.S trade surplus and RMB exchange rate. Fourthly, the results of empirical analysis in the fifth chapter5.1section shows the sum total of China’s Import and export elasticity is less than1in the sample period, Marshall-Lerner condition is not established. It is the root reason for RMB exchange rate and Sino-US trade balance was unrelated. And then discusses the causes of China’s trade surplus with the deep-seated reasons. Finally, puts forward reasonable policy and suggestions to narrow Sino-U.S trade surplus.This paper gets the following basic conclusions:firstly, in the sample period, whether based on annual time-series data or quarterly time-series data. RMB real exchange rate is not the cause of China’s trade surplus with the " Grainger "; also, Sino-US trade surplus and RMB real exchange rate has no stable cointegration relationship.RMB exchange rate has the very limited impact on China’s trade surplus. Attributing the huge trade surplus to the exchange rate of RMB is untenable. Appreciating of RMB is not the effective measures to reduce China’s trade surplus. Secondly, because Marshall-Lerner condition is not established in China, so RMB exchange rate is not the main reason for Sino-U.S trade surplus. The social, economic and statistical factors such as Sino-U.S industrial division of labor, the USA technology export control, domestic consumption policy lead to Sino-U.S trade surplus expansion. Thirdly, in order to narrow Sino-U.S trade surplus, USA should adjust domestic policy, release import&export control; China should enlarge domestic demand, transform trade growth mode, develop FDI, reform of statistical system of regular project, establish Sino-U.S Trade Dialogue, improve the RMB exchange rate system, etc.