A Theoretical And Empirical Study On The Relationship Between RMB Exchange Rate And Sino - US Trade Balance

As one of the rapid growing developing countries, China has attracted the eyes of the world since the turn of the century. Our country has presented a good development momentum in all areas of the economy. But at the same time, China’s foreign trade friction intensified increasingly, some western countries criticize the RMB exchange rate system. Since July 21, 2005, the second exchange rate system reform in our country has been implemented for nearly 10 years, our country has adapted to the management floating exchange system which take the market supply and demand as the foundation, refers to a basket currency to carry on the adjustment. The RMB exchange rate has been more and more marketization.Traditional exchange rate theory holds that in the case of Marshall-lerner condition, currency appreciation will lead to a drop in its exports, and an increased in its imports, vice versa. Through currency appreciation or depreciation, a country’s government can adjust their international accounts to be balance. However our country’s actual data shows that from 2006 to 2013, while after the RMB exchange rate reform since 2005 has been maintained a steady appreciation against the dollar, but at the same time China’s exports to the United States and the trade surplus is still maintained a momentum of rapid growth and expansion, this cannot be explained by traditional theory.The author of this thesis find a breakthrough point in the traditional exchange rate theory. On the basis of reading a large number of relevant literature, the author adopt a mode which combine the theoretical analysis and empirical analysis to analyze the relationship between RMB exchange rate and trade balance between China and America. In terms of theoretical analysis, we mainly rely on the elastic analysis method for the relation between the exchange rate and balance of trade. In terms of empirical analysis, we select relevant sample data, establish regression model, and get corresponding conclusions.In fact, the cause of rapid growth of China’s trade surpluses with the United States is not the yuan undervalued, instead the appreciation of yuan make China’s trade surpluses with the United States grow faster. According to the analysis conclusion, the author make some policy recommendations to solve the problem of RMB exchange rate.