China’s Exchange Rate Policy And Its Impacts On The Bilateral Trade Between Vietnam And China

Since the economic reform in1978, China’s economy has achieved dominant succeed in economic development. From a less-developed country with GDP per capita of Rmb381in1978, it is to more than Rmb40,000in2011. Till now, it remains as the expected destination for many economic activities from the rest of the world include FDI, trade, finance. Among these, trade activities have been bringing huge profits to create a driving force for economic development and transformed China to be one of the most powerful countries at present.There is one policy that has played an important role in the success of China’s economic reform that is the exchange rate policy. It has brought very bright achievements to the trade flows of China, especially for exports. It also plays a key point in the high economic growth in the last two decades that helped partially in bringing the light and heavy industries of China to a higher level in the world.This study is divided in five chapters. The first chapter systemizes the theoretical framework and literature review of exchange rate policy and its impact on trade flows among nations. Following which, the second chapter introduces the exchange rate policies in China and Vietnam and their characteristics. China is the biggest trade partner of Vietnam (occupied17.5per cent of Vietnam’s total trade flows in2011) so it has great affects to Vietnam’s economy, especially to export.The third chapter is about the impacts of exchange rate policies and quantified impacts of China’s exchange rate policy to trade flows to Vietnam. In chapter four, the author would like to foresee China and Vietnam’s exchange rate policies and then provides some policy suggestion to encourage more trade flows between the two countries as well as rebalance their trade balances.