Research On RMB's Exchange Rate Changes And Sino-U.S. Trade Imbalance

RMB exchange rate has a significant impact on the development of Sino-U.S. trade. China has gradually implemented the reform of RMB exchange rate since July 21, 2005. RMB exchange rate is no longer pegged to U.S. dolloar. It chooses a number of major currencies and is given the appropriate to form a basket of currencies. This paper aims to investigate the distortion of RMB exchange rate against the U.S. dollar and the influence brought by the change of RMB's exchange rate on the bilateral trade between China and U.S.A.In this paper, the empirical ananlysis models are built on previous theories and studies. The RMB equilibrium exchange rate against the U.S. dollar is measured through the H-P filter analysis. The unit-root test, Johansen cointegration test, error-correct model and impulse-response function are applied to study the relationship between RMB exchange rate and Sino-U.S. trade balance and trade structure since July, 2005.This paper carries out some innovations. Firstly, it's innovative because there are not many highly specialized and in-depth studies in this area although many people have made analysis on it. Secondly, this paper uses the theoretical and empirical approaches, combined with the latest data to make the research. In addition, it also put forward its viewpoints: RMB's undervalued situation exists; the change of RMB exchange rate can make some changes in the short run, but cannot bring fundamental improvement in the long run; the appreciation of RMB will also help China adjust the Sino-U.S. trade structure.