The Influence Of RMB Exchange Rate Fluctuations On Sino-US Trade Balance

In recent years, as China’s international trade balance is increasing, the international communities have questioned whether the RMB exchange rate is undervalued. From1993the first time China achieve trade surplus with the US, the trade balance between China and the United States constantly expanding, and the huge trade deficit between US and China are also lead to trade frictions between China and the United States. The trade imbalance between China and the United States affect the normal trade association in the two countries, which adversely affected the economic stability and development in both countries. Especially after the financial crisis, the RMB exchange rate once again becomes the focus of debate between the two sides. The United States believes that because of the yuan is undervalued that led the United States has huge trade deficit, so in order to improve the situation of Sino-US trade, The United States repeatedly asked China to appreciate the renminbi. In this paper we focus on the debate between China and the United States, to research the relationship between the RMB exchange rate and China-US trade balance, analyze whether the appreciation of the renminbi can improve the situation of Sino-US trade, and reduce the trade deficit between the two countries.The traditional international trade theory holds that a country’s currency devaluation can increase exports, reduce imports, thereby improving a country’s trade balance; Instead, a country’s currency appreciation can make one country’s trade balance deteriorated. But why the appreciation of the renminbi does not reduce the Sino-US trade surplus, whether the RMB exchange rate fluctuations can influence the Sino-US trade balance, these problems are worthy of our analysis and research.In order to study the impact of the RMB exchange rate fluctuations on Sino-US trade balance, we choose monthly data from January1995to December2011, focus on the RMB exchange rate fluctuations and China-US trade balance, use the unit root test and cointegration test, from the point of the total as well as classification of goods to analyze the relationship between the RMB exchange rate volatility and the Sino-US trade balance.As the relationship between the RMB exchange rate fluctuations and China-US trade balance, this study shows that it is impossible to resolve US-China trade deficit, depending only on the movement of RMB’s exchange rate. The monthly data during1995-2011shows that there are no long-term and stable cointegrating relationships between the RMB exchange rate and China-US trade balance. Moreover, the conclusion derived from US Census Bureau monthly data is consistent with that from China National Statistical Bureau monthly data. It is impossible to resolve US-China trade deficit issues with an attempt to have RMB’s exchange rate floated.