Analysis Of The Impact Of RMB Exchange Rate Fluctuation Upon Balance Of Payment

Since 1993, our balance of payment has already hold double surplus for over 10 yearswhich not only involves abundant trade surplus in Current Account but also exists inCapital Account. Taking the BOP (balance of payment) of China in recent 20 years asthe objective, the paper studies the influence of RMB exchange rate fluctuation uponBOP especially on the trade balance and the Foreign Direct Investment. With thefurther analysis of the impact, the paper comes up with the necessity of RMBappreciation and also offers some policy suggestions for the RMB exchange rate'sadjustment.The paper first tells the background and significance of the research, summarizesseveral popular opinions about the effectiveness of RMB exchange rate adjustmentupon the trade balance, and puts forward the researching approach and frame of thestudy.Chapter Two simply introduces the current situation of our BOP and the ways how theexchange rate fluctuation affects BOP.As one of the emphases of the paper, Chapter Three studies the infection of RMBexchange rate fluctuation upon the trade balance, makes demonstration and analysisbased on Marshall-Lerner Condition, and selects data ever since 2005 to discuss theinfection of RMB appreciation upon the trade balance.Chapter Four chooses the Foreign Direct Investment to represent Capital Account,based on the data of capital flow, analyses the infection of exchange rate fluctuationupon Capital Account, which equals the impact to FDI, then discusses the developingtendency as well as directions of the FDI after RMB appreciation.In the end the paper sums up the previous analysis, brings forward the way ofexchange rate adjustment which means RMB appreciates slowly while the floatingrange enlarges gradually, finally gives some policy suggestions.