Impact Analysis For The Appreciation Of RMB On China's Economic Growth

From July 21,2005 ,China began to implement a new exchange rate system. It's a managed floating exchange rate system that is based on market supply and demand with reference to a basket of currencies to adjust.After the exchange rate reform,our currency continues to show a small appreciation overall trend.Since July 2005 Renminbi has risen 21 percent against dollar,with 16 percent appreciation of the real effective exchange. With the continuous appreciation of Renminbi,the impacts on China are gradually emerging,including the gross domestic product ,import trade,export trade,foreign investment.The purpose of this paper is through changes in the RMB exchange rate to observe the effects on various aspects of ecnomic growth in our country.This paper constructs Computational General Equilibrium(CGE),based on the 1-2-3 model,changes the benchmark price that domestic prodution,domestic consumption price is equal to 1,taking the real effective exchange rate of RMB as exogenous variables,the socil accounting matrix(SAM) and data in the year of 2005 as the base period data,after obtaining all of the exogenous variables and coefficients,through MATLAB7.0 solving equations,changing various model cofficients and exogenous variables in order to make the simulated results meet the base period data.In the base of above model,changes the exogenous variable,the real effective exchange rate of RMB, as a policy simulation ,comparing the impacts of different real effective exchange rate changes on various aspects in our country.The results showed that the real effective exchange rate of RMB and gross domestic product ,imports and exports are all non-linear,that is the relevant elasticity is not constant.When the real effective exchange rate of RMB volatility is between 15% and 20%, the growth of the gross domestic product is around 9%.In addition,the effects of the real effective exchange rate volatility on exports are consistent with the people's expectations,with the appreciation of the real effective exchange of RMB,exports show a downward trend,which is due to the appreciation of domestic currency to promote the increasing of domestic exports prices expressed in foreign currency,weaking the price advantage of our exports.In import side,with the appreciation of the real effective exchange of RMB,imports has occurred dramatic fluctuations after the appreciation magnitude reaching a certain level.Be interpreted as demand of domestic residents on such as luxury consumer goods,jewelry,cosmetics,tobacco and alcohol,travel,luxury cars has sharply increased after appreciation of the real effective exchange rate of RMB reaching a certain level,meanwhile the imports of raw materials and machinery and equipment is also steadily increasing,thus stimulate the rapid growth of our imports in dual sides.