Analysis On The Impact Of RMB Appreciation On Export-oriented Economy In Shanghai

Before he 1990'S when single exchange rate was conducted,China had been in trade deficit for several years.After 1993,it turned to trade surplus almost every year.For recent years,there has been an international appeal for China to reform the RMB exchange rate machenism.Different opinions exist on whether RMB shall rise and whether the exchange machenism shall be reformed.PBC announced on July.21st, 2005 that the exchange rate of RMB will refer to a basket of currencies.From 2005 to May,2008,the appreciation of RMB has accumulated to 15.4%.According to history, each reform on exchange rate machenism would incur the change of exchange rate and influence the open-ended economy of China.As one of the major economic entiries of China,Shanghai is also facing the huge challenge.This paper studies on the impact of rmb real effective exchange rate on export-oriented economy in Shanghai.On the basis of the analysis on the procedure of trade and foreign direct investment in Shanghai , the paper combines the quantitative and qualitative study methods and analyzes the impact of 15 years'fluctuation of exchange rate on trade and foreign investment in Shanghai.It is shown that change of rmb real effective exchange rate has an evident impact on Shanghai'S trade.The real effective exchange rate of rmb is in inverse ratio to Shanghai export and import trade and the Marshallian coefficient is larger than 1.It also effects the foreign direct investment in Shanghai in an inverse way.This paper is consist of 6 sections.The first section introduces the background,related definitions,the study method,the range and limitation of this paper.The second is about theories and works on exchange rate and talks about the current situation of study on this topic.The third section focuses on the development of rmb exchange rate and trade and foreign direct investment in Shanghai.The fourth and fifth sections are the key part of the study which analyzes and concludes the impact. The sixth section is policy suggestions for improving trade in Shanghai and FDI.