Rmb Exchange Rate Volatility On China’s International Balance Of Payments

According to the traditional theory of the balance of payments, a country’s exchange ratefluctuations will affect its international balance of payments, the appreciation of theircurrencies relative price of export products of the country rises, decline in the relative price ofimported products, export products competitive in the international market weakened, soreduced exports, increased imports, the trade surplus decreased. July,2005, China reformedRMB exchange rate formation mechanism, and the RMB exchange rate went up. Since then,the yuan has begun the slow process of appreciation. Along with the appreciation of therenminbi, China current account, capital and financial account continued to maintain asurplus. Whether a country’s exchange rate adjustment can contribute to the internationalbalance of payments, or can influence the extent to which the international balance ofpayments, become a hot spot in the field of international financial.In this paper, the empiricalanalysis methods, respectively, analyzed the impact of the RMB exchange rate changes onChina’s international balance of payments current and capital projects, study the RMBexchange rate in the regulation of the international balance of payments, and promote China’sinternational balance of payments based on the results of the study policy recommendations.Theoretical analysis stage in the process of writing this article, first sort out the researchstatus at home and abroad, the summary of the theory of the exchange rate affect the balanceof payments, and points out the strengths and weaknesses of the various theories. Empiricalanalysis phase, this article established the equation of the RMB exchange rate to trade underthe current account balance of payments impact, including the impact of the RMB exchangerate on export equation, equations, and the RMB exchange rate of the RMB exchange rate onimported impact on the trade balance equation; RMB exchange rate on the impact of foreigndirect investment equation. Empirical analysis using cointegration analysis method to studythe long-term relationships between variables, using vector error correction model to studyshort-term dynamic relationship between the variables.The empirical results show that the current fluctuations in the RMB exchange rate is notthe most important factor to affect China’s international balance of payments, improvingChina’s international balance of payments situation is difficult to achieve the desired effect by adjusting the RMB exchange rate. The range of adjustment of the RMB exchange ratefluctuations could lead to imported inflation, adjusting the industrial structure, transform themode of economic growth are the current focus.