Study Of The Relationship Between Changes In The Rmb Exchange Rate And China's Trade Balance Of Payments Situation

Exchange rate is the comparative price between domestic and foreign currency, which has enormous influence on economic stability and development. It affects import and export by the adjustment in its real value. To prove and explain the existence of this effect is our main purpose in this paper.We start by intruding some theories in the area and concluding other economists' research on it. Then, review on the development history of China's foreign trade after the reform and opening in 1979 will also be given. To make the research process more precise, three parts were included in our expatiation. Besides talking about foreign trade in different sections, we analyzed the connection between fluctuations in exchange rate and the corresponding results in export and import.Unit root test, integration theory as well as Granger casualty test are all used in discussing the relation between exchange rate fluctuation and foreign trade to make our conclusion more solid. In this research, we can know time series of real effective exchange rate, export and import all have a unit root. And long-term integration relationship exists among them. Also, by using impulse response graph, we know time lags exist only in the export, not in import.In the end, some suggestions are given in this paper to cope with the rising appreciation pressure of RMB and the rising trading conflict between China and its partners, which includes expedite reform in exchange rate regime, upgrade our products, make adjustments in our economic structure, and take use of WTO principles to guard our benefits. We believe that after the implementing of these measures, China's economy will become even stronger in future.