Theory Of Rmb Real Exchange Rate Volatility's Influence On The Sino-us Trade Balance

China is the biggest developing country with fastest economic growth in the worldand US is the most developed country with the world’s most successful economies.The bilateral trade between China and US produced important influence on the worldeconomy. Since1970s, China keeps a trade surplus to US and the number keepsgrowing. US blames the expanding trade gap on China’s exchange rate regime andbelieves RMB is undervalued and keeps asking China to revaluate RMB.I started by introducing the theories in this area and concluded other scholars’ research,domestic and abroad. Then I gave a review of the historical exchange rate regime inChina and the development of the bilateral trade between China and US.To better study the relationship between real exchange rate and trade volume, Iselected the data from1Q1995to3Q2010to build a VAR model and used severaleconometric methods such as unit root test, cointegration test, VEC model andvariance decomposition. My conclusion is that the appreciation of the RMB willdecrease China’s export but the impact is limited. US’s domestic demand has a biggerinfluence.At last I also gave some suggestions to cope with rising appreciation pressure of RMBand the rising trade gap between China and US.