Analysis Of ASEAN Trade Balance - RMB Exchange Rate On China

With the establishment of the China-ASEAN Free Trade Area,the economic exchanges between both parties have become more and more frequent.However,from the perspective of China,the import from the ASEAN grows faster than the export to it.Consequently, the ASEAN has become the major source of China’s foreign trade dedicit.To conclude, the bilateral trade development is not balanced.Therefore,this paper intends to analyze the impact of RMB exchange rate on the bilateral trade balance from both theoretical and empirical ways.Followed by reviewing the adjustment theory of balance-of-payment and statistically analysing the movements of exchange rate and bilateral trade balance, this article calculates the RMB real effective exchange rate (weighted exchange rate of RMB)in exchange for the currency of the ASEAN countries,referring to the method of measuring and calculating real effective exchange of IMF.Based on the gravity model,this paper carries on overall analysis and structure cointegration analysis to measure the influence of weighted exchange rate of RMB on the trade balance of China-ASEAN,taking both exchange rate level and exchange rate fluctuation into consideration.The overall analysis indicates that both long-term equilibrium and short-term dynamic adjustment relationship exsits.To be detailed, the cointegration analysis proves that elasticity of the trade balance on the level of weighted exchange rate is-3.45and the elasticity of the trade balance on the level of exchange rate fluctuation is0.7;the results of short-term analysis prove that the short-term impact of exchange rate on trade balance is less obvious than the long-term impact; The impulse response analysis demonstrates that the J-curve doesn’t significantly exsit.Finally,the structure cointegration analysis shows that exchange rate reform results in the change of the cointegrating parameter between the weighted exchange rate and trade balance.Based on the above analysis,we make some possible proposals on the balanced development of the China-ASEAN trade,from both the exchange rate and non-exchange rate perspective.