Empirical Study On Impact Of Rmb Exchange Rate Variability On China’S Edible Vegetable Oil Trade

Since1990s, the demand of China’s edible vegetable oil has increased very fast. And it becomes more and more dependent on import. After Food Security, the Security of Edible Vegetable Oil has become another tough problem of China. In this situation, the paper focuses on analyzing the impact of RMB exchange rate on China’s edible vegetable oil trade. At the beginning, we give a general introduction of the related theories and researches which have been done home and abroad. After that, we take a short review of the evolution of the RMB exchange rate regime, and have a general description of the variation trend of RMB exchange rate and the development of China’s trade in edible vegetable oil. Based on that, we calculate the real effective exchange rate (REER) of RMB especially for China’s edible vegetable oil trade. In empirical analysis, we first analyze the effect of RMB REER on the import and export of China’s edible vegetable oil. And then, we take a look at the impact which RMB exchange rate may have put on the edible vegetable oil’s import structure, both in breed composition and import source.The result shows that in the long run the domestic real income is the main contributing factor of China’s edible vegetable oil import. But the real income of China’s trade partners has a negative effect on China’s edible vegetable oil export. However, the RMB REER shows a negative effect on both import and export, but the effect on export is greater. Chow Test indicates that the effect of RMB REER is significantly different in different period. From1990to2004, the trade of China’s edible vegetable oil meets the Marshall-Lerner Condition. But it doesn’t meet the condition after2005. And in the short run, the RMB REER lagging one period has a positive effect on the import, and the RMB REER lagging two periods has a positive influence on the export too.Meanwhile, according to the analysis of import breed composition, the elasticity of soybean oil is the biggest, followed by the palm oil and other oil, and the elasticity of rape seed oil is not significant at all. Import source analysis shows the nominal exchange rate of RMB has a positive correlation with the market share of Argentina, Malaysia and Indonesia, but a negative correlation with the share of USA and Brazil.According to the results given above, we get a conclusion that the trade deficit of China’s edible vegetable oil will be further expanded. And the import source will also become more concentrated in future. In order to improve the self-sufficiency of China’s edible vegetable oil and guarantee its security of supply, we suggest that the government gives more support in the production of oil plants and to guide the oil processing industry to develop in a more scientific way, while broaden the import channel of edible vegetable oil.