The Impact Of RMB Exchange Rate Movements On The Trade Between China And The United States

Ever since China and the United States established an official diplomatic relationship in Jan.1st.1979, the two countries have developed an integrated partnership in political, cultural, and more importantly, in economic field. If China and the United States, the world’s largest developing and developed economic entity, can maintain a good and stable trade relationship, it will not only benefit the two involved countries, but also the healthy development of the global economy.However, a tough problem emerged with the expansion of the bilateral trade, which is Chinese trade surplus to America has been becoming increasingly larger all the time, which further causes all kinds of trade frictions between the two nations. And the United States government firmly claimed that it is the underestimation of Chinese currency that cause the trade unbalance between the two nations. To make matters worse, the previous simple economic issue has already upgraded to political issue and aroused international discussion. Especially during the year of2009, with a worldwide background of low economy momentum, China seemed to have.made it through and started a "V" reversion, but this is not easy, since the reversion goes with an extremely complicated international trade environment, and China is still having large amounts of trade frictions with its business partners all over the world, to make matters worse, many countries charged China for dumping goods to their domestic markets.Additionally, data shows that China has become the member which is suffering the most frequent anti-dumping and anti-subsidizing investigation, and the United States is the one which launches most attacks to China under the coat of anti-dumping. Apart from that, the United States takes measures like intellectual property and quota restraint to reduce importing goods and service from China.Thus, in order to make the Sino-US trade relationship develop in a healthy way, it is necessary to further study the structure, scale, causes and influence of Sino-US trade surplus. Based on the quarterly data since2005, and with the help of econometrics software, this paper focuses on the solving the problem of whether the under-estimation of RMB exchange rate caused the serious unbalance between China and the US. And finally, with the result of the empirical test, the author gives out her explanation and furthermore, some suggestions for Chinese government to consider to solve the issue.