The Impact Of RMB Exchange Rate Changes On The Bilateral Trade Between China And ASEAN

In recent years, whether the RMB is undervalued has been the focus of controversy. The United States and some other western countries put various pressures on the issue of RMB exchange rate. The RMB has raised a grand total of30following the end of a fixed exchange rate in July2005. Chinese goods become more expensive and our export enterprises suffer negative impact. On the other hand, with the relationship between China and ASEAN become closer, the bilateral trade volume between china and ASEAN is substantially increasing. ASEAN has become China’s third-largest trading partner after America and the European Union. These facts are not in accord with the traditional trade theory that the value of RMB and the bilateral trade volume between China and ASEAN keeps rising at the same time. This paper is going to find a reasonable explanation for the phenomenon, and examines the trade relationship between China and ASEAN. The policy recommendations at last are important for the development of trade relations between China and ASEAN.This paper first introduces the research background and significance, and describes the research progress and related theories both at home and abroad. This paper summarizes the related theories while comparing the advantages and disadvantages of them. In order to study how the RMB exchange rate affected the bilateral trade between China ASEAN, this paper uses panel data model, applying the fixed-coefficient model. The empirical analysis selects the quarterly data of five ASEAN countries and Chinese as sample, and then establishes export and import equations. The innovation of this paper lies in the use of the virtual variable that is used to measure the impact of the financial crisis and the time trend variable.Empirical results indicate that the appreciation of the RMB will promote China’s exports to ASEAN, while there is no statistically significant relationship between the exchange rate of RMB and China’s imports from ASEAN. China’s imports from ASEAN mainly rely on domestic demand, while exports mainly rely on foreign demand. We find that the time trend variable is proportional to the bilateral trade, while he financial crisis restrain the bilateral trade. Then the analysis at last explains the reasons for this result from the perspective of the mode of trade, the industrial structure, the national policy and the false data. Finally, according to the results of empirical analysis, this paper provides policy recommendations. The focus of the current Chinese economic development should be upgrading of the industrial structure, expanding domestic demand and actively promoting the internationalization of RMB.