Empirical Research On The Influence Of The Rmb Real Exchange Rate Changes On USA-China Trade DeficitsRespective

Since financial crisis happened in USA in 2007, the huge USA-China trade deficits has contributed to the update of trade conflicts between two countries and the American government tried to define China as a currency manipulator and brag the theory of the RMB appreciation. However, will the appreciation of RMB decrease the trade deficits between USA and China?This paper will analyze the relationship between changes of the RMB real exchange rate and USA-China trade deficits based on the monthly data from 1996 to 2010 by using the classical econometrics methods, such as ADF test, cointegration and granger causal relationship test; and then we come to these four key conclusions: (1) The empirical analysis based on the monthly data from 1996 to 2010 reveals that the changes of the RMB real exchange rate can't explain the expansion of USA-China trade deficits well from the long-term respect. (2) Although we find they have a long-term stable cointegration relationship based on the empirical research from the July 2005 to 2010, such relationship will soon be proved not to pass the Granger Causal Test and thus there is no evidence to support that changes of the RMB real exchange rate are due to the expansion of USA-China trade deficits. (3) USA-China trade deficits focuses on the following commodities: Manufactured goods classified chiefly by material; Machinery and transport equipment; miscellaneous manufactured articles.All those research results strongly challenged the wrong theory of the RMB appreciation. Such huge USA-China trade deficits can be possibly well explained by the following four reasons: firstly, the respective comparative advantages determines the present trade mode; secondly, the industry transfer from USA to China will increase the trade deficits; thirdly, the extra investment out of USA will be a significant cause of the trade deficits expansion; at last, the USA export barriers in the High Technical field will deduce the export to China. Consequently, we continue our research to make three suggestions concerning this topic: firstly, both of countries might utilize their comparative advantages and promote the trade structure; secondly, both of the government should hold an objective view about the huge trade deficits and devoted to construct a free trade market; thirdly, the Chinese government must pay more attention to intrigue the domestic demand and realize the balance of trade.