The Effect Of RMB Exchange Rate Changes

’Since1978, China has experienced three reforms on exchange rate, which areinextricably linked with the macroeconomic environment. However, in the process of China’sintegration into the World economy, the three reforms haven’t been seemed to be able toachieve the recognition of the global partners. Especially the past two decades, the westerncountries complained the RMB were underestimated to some extent. Even the normalexchange rate of RMB has been appreciated by about22%since2006, the trade surplus andforeign reserves of China have continued to grow year by year. Whether the appreciation canmanage the imbalance effectively hasn’t been consensus in both the academic and theadministration, the RMB exchange rate is still a hot topic in the World. Whether RMBexchange rate should continue to appreciation or depreciation? How can reduce the tradeimbalance by appreciation? What’s the effect of RMB value change on the macro economy?All of these issues needed to be considered seriously. The purpose behind this paper is todiscuss the pass-through effect of the RMB appreciation on the export, import, domestic priceand the job market of China by several empirical analysis. The results show that first, theslight appreciation of RMB on our economic growth is little; Different from the traditionalgeneral trade, the impact of RMB value changed on processing trade depends on the contentof domestic value-added. On one hand, appreciation will increase the prices of export, on theother hand, the prices of intermediate inputs will decrease by the currency appreciation. Dueto the processed products exported by China contains lower domestic value-added content,the combined effect of RMB appreciation on China’s international trade is little. Second, takeninto account the growth rate, the level of inflation, unemployment and other factors, Chinashould further improve the RMB exchange rate formation mechanism, timely initiative toincrease the exchange rate floating in space. thirdly, the exchange rate reform should be basedon our national conditions, timely, steady and orderly manner, the sharp appreciation in theshort term will be expected to create a big shock to macro economy and the recovery of theworld economy as a whole.