Research On The Effect Of REER Fluctuation On Fujian's Trade

"Made in China"can be found in every corner of the World. There are many unpleasures caused by China's increasing trade surplus. Some countries require RMB to appreciate because they think China is enlarging trade surplus by undervaluing RMB. Therefore, topics concern to the appreciation of RMB is getting hotter recent years.Most discussions get focuses, such as if RMB is undervalued? if it should be appreciated and what is the appropriate percentage? and how will the appreciation affect China's economy, especially China's foreign trade. Most economists who oppose to the appreciation theory are worrying that the appreciation will impact China's export strongly according to traditional Economic theories. As a highly opened coastal province, if Fujian's Trade will be affected badly? This paper is issued on this ground. Hope to benefit to concerned parties to react to the appreciation of RMB objectively and positively, and to improve the development of Fujian's Trade steeply and orderly.Based on theories and literatures existed, this paper analyzed trade history of Fujian province systemically. Then, statistical analysis during 1994---2007 is conducted facilitated by Eviews5.0 after modes export demands and import demands. Cointegration test shown that both the export demands model and the import demands model were cointegrated. Then, Granger Causality Test was conducted, and the results revealed that the fluctuation of REER is the Granger cause of both import growth and export growth in Fujian province, while the contrary tests are both not supported. In order to know how the system react to the impact of REER in short-term fatherly, Impulse Response Function and Variance Decomposition were used. The coincident conclusion was that the fluctuation of REER affects import growth only, and the effect on exports is so little that can be neglected. In the end of this paper exploited the reasonable explanations of this paper's research conclusion and some suggestions was given for the development of trade in Fujian province.