Study On The Relationship Between RMB Exchange Rate And The Sino-US Trade Imbalance

With the rapid development of the China foreign trade situation in recent years, China official data show that the total import and export volume of China is more than4trillion dollars, and up to4.16trillion dollars in2013. China become the world’s largest trade country instead of USA in the world. For improving of the China foreign trade situation, western countries especially USA always put pressure to China about RMB and require RMB to appreciate. United State claimed that the underestimated RMB exchange rate was the reason of global economy imbalance, and China held down the rate of RMB to boost domestic export which led the lower growth rate of USA, massive unemployment and other economic and social problems. However, some Chinese scholars consider the appreciation of the RMB exchange rate could not solve the current global economic imbalances, and the requirement is just for its own political reasons.To further explore the relationship between RMB exchange rate and trade balance, the paper combines theory and empirical methods to make an analysis on issues related to the system systematically. The paper outlined the balance of international payment decision theories briefly firstly. The third chapter reviews the change of Sino-US trade balance under the different period and different RMB exchange rate system. The fourth chapter constructs econometric analysis model based on the theory of balance of payments to investigate the relationship between RMB exchange rate and bilateral trade balance. The research shows that the RMB exchange rate and the Sino-US trade balance exist econometrics co-integration in the long term, while the RMB exchange rate relative to USA fiscal deficit is not the main factor of United State trade deficit with China. The fifth chapter further analyses the deep reason of Sino-US trade imbalance from the theoretical point. Finally, the paper put forward some policy proposals from the side of Chinese government according to the American’s exchange rate pressure.