An Empirical Study On The Relationship Between The RMB Exchange Rate And China's Foreign Trade

The exchange rate is a country's most important comprehensive price indicator in the international economic activity. In the international financial and international trade activities the exchange rate is in the implementation of a price change their functions, thus becomes an important lever of foreign trade, its change has a profound impact on a country's trade balance and domestic economic activity. After reform and opening up, the RMB exchange rate change stimulates our country exportation, it has played an important role on improving our balance of trade and foreign direct investment.The paper takes the RMB exchange rate change and the China foreign economic equilibrium inner link as the research objectives. On the basis of correlation theory for the exchange rate change and foreign trade relations, using econometrics theory the article further analyzed the relationship between the RMB exchange rate movements and China's foreign trade, which including the quantitative study as follows: the relation of the RMB actual effective exchange rate change and the balance of trade from January 1994 to December 2005, the relation of the RMB exchange rate change and the terms of trade from 1981 to 2004. Real diagnosis analysis indicated that between the Chinese balance of trade and the RMB actual effective exchange rate has a long-term stable co-integration relations. If the RMB revaluation is larger scale, in the short-term it has an impact on our import and export then may trigger off possible economic fluctuations, which is not conducive to China's national economy steady development. Moreover, the RMB revaluation will not necessarily inevitably bring improvement to our country price trade condition, the import increased while causing the price of imported goods rises, China's terms of trade deteriorated. Finally, on the basis of the above empirical research, the article give a brief evaluation on the impact of the change of exchange rate on China's foreign trade and puts forward the correlation policy proposal.