A Study On The Effect Of RMB Appreciation On Trade

The issue of exchange rate is one important international finance problemthat is closely related with one country's economy, as a main kind of economiclever, either appreciation or depreciation of exchange rate will exert a greatinfluence on one country's foreign trade, therefore, the effect of exchange ratechanges on trade development is a great subject of international economics. Alarge number of trade surplus and foreign exchange reserve that the fastdevelopment of foreign trade of our country accumulated, make our countryface unprecedented RMB appreciation pressure at present, once RMB isappreciated ,which kind and how heavily of the influence to our country's tradeare worth studying very much, so the effect of RMB exchange rate's changes ontrade is the main researched purpose of this text. on the basis of the review ofthe existed theory and utilizing revised Marshall-Lerner Condition and J-curveEffect , This article have an theoretical analysis and experience examination onthe effect of RMB exchange rate's changes on trade if both the elasticity ofexport supply and the trade balance in China are too much high, finally ,wecome to a conclusion that the impact of RMB appreciation on the trade surplusis limited. meanwhile , consider the harmful effects that may be produced to thetrade of our country, we put forward some concrete measures :With the title of the effect of RMB appreciation on the China's trade, Thisarticle describes the relevant problems in four partsThe First section reviewed the theory of the effect of exchange ratechanges on trade. including mainly relevant theory such as classicaltheory ,elasticity theory , absorption theory , monetary theory and incompletelytransmission theory . The article starts with Thomas Mun's exchange ratechange view and David Hume's price-specie-flow mechanism, have introducedclassical theory's argumentation of the relation between the exchange ratechange and trade revenue and expenditure; The most important and mostpractical elasticity theory the existed theory, carry on detailed retrospect for theexample with Marshall-Lerner Condition mainly, point out the term ofexchange rate depreciation improving trade balance is that the absolute value ofthe summation of import demand elasticity and export demand elasticity ismore than 1; Alexander's Absorption Theory consider that one country's tradebalance could improve when one country's yield exceeding absorption(domestic resident's expenditure ) ,by this way, depreciation can directly orindirectly improve the international revenue and expenditure, Monetary Theoryregard international revenue and expenditure as one monetary phenomenon ,think any disequilibrium of balance of payments reflect monetarynonconformity of stock, then, depreciation can improve the internationalrevenue and expenditure through influencing the change of the money supply;Finally, the Incompletely Transmission Theory explain the fact that theexchange rate fluctuation and the trade revenue and expenditure with thetheory of imperfect competition , industrial organization , precipitating cost ,etc.The second part renews the traditional theory model, with the introductionof the experience of Japanese yen appreciation. Starting with limitation of theassumed conditions in the Elasticity Theory, this part have carried onsupplement and revised the trade effect theory of exchange rate throughrelaxing the corresponding assumed conditions. at first, Consider imports andexports elasticity of supply not infinitely great, we form theBickerdike-Robinson-Metzler Condition with including supply and demandelasticity of import and export, prove the smaller the elasticity of supplyexported is , the more difficult to be satisfied the condition of depreciationimproving trade balance; Secondly, have analysed the influence of trade balanceto the elasticity of the exchange rate, and come to the conditions of improving Vmtrade balance: nx + ·nm > 1, proving that there is a large amount of Vxtrade balance surplus, the appreciation impact on trade balance is limited;Finally, investigating the effect of skewing of the Elasticity Theory, proving thatAnti-J-curve Effect of exchange rate appreciation is much more gentle , beingdifferent from the J-curve Effect under the situation of depreciation. In this part,through the revision of the existed theory, we can prove the trade effect of theappreciation situation is not similar to the one of the depreciation situation, thisview is a main innovation of this text.This part, also through reviewing the fact that appreciation and tradesurplus coexist in Japan at the same time, prove the result which is from abovetheoretical analysis, illuminate further more that one money's appreciation notalways cause the deterioration of international trade balance.The third part has studied the impact of RMB appreciation on China's traderevenue and expenditure, with using the theory conclusion of foregoingparagraphs. First, this part introduce the development course of RMB exchangerate system briefly, and have an overview of relevant views about the influenceof RMB appreciation; Secondly, utilizing the analytical method of partequilibrium and general equilibrium , through setting up the return equationbetween trade balance and exchange rate, we have a demonstration about theRMB exchange rate effect on the trade balance of China, which proved theadverse effect on the trade balance of China is not remarkable; Finally, bycomparing the RMB appreciation's favorable influence and adverse effect onthe imports and exports of our country, this part has drawn a conclusion thatRMB appreciation is favorable to china's foreign trade for a long run. it provesthat there are some strikes to china's foreign trade through the analyticalmethod of part equilibrium, and it proves this kind of influence is limitedthrough the demonstration of the general equilibrium, the combination of twokinds of research approaches is an important characteristic of this article.The fourth part summarize the analysis conclusion of the foregoing...