The Impact Of Weak Dollar Adjustment On Trade Between BRIC Countries

From2002, dollar has been weakening. The dollar also has devaluated against the currencies of the BRIC countries. BRIC countries trade between each other, using dollar as pricing and settlement currency. As dollar has become weak, the trade between China and the other BRIC countries has rendered rapid development. Whether and how has the weakening dollar affected the trade between China and the other BRIC?Using annual data during the period2003-2011, this paper explore the trade relationships of China, USA and the other BRIC countries by comparative analysis. This paper also investigates the effect of dollar on the trade between China and the other BRIC countries, using quarterly cross-country and monthly cross-product panel data from the period2003to2012. The main results are as follows.Firstly, there is no significant "triangular" trade relation among China, USA and the other BRIC countries. What is more, significant trade competition does not exist between China and USA in the markets of India, Brazil and Russia. Therefore, the impact of dollar on the trade between China and the other BRIC countries will be not sure, which depend on bargaining power of importer and exporter.Secondly, the empirical results show that weakening dollar has significantly promoted the trade between China and the other BRIC countries. What is more, the impacts of the weakening dollar on the bilateral trades between China and the other BRIC countries are different. That reflects the different trade patterns of the bilateral trades between different countries. Meanwhile, the depreciation of RMB against the other BRIC countries’currency has significantly promoted the trade between China and the other BRIC countries.Thirdly, the impact of the weakening dollar on the trade between the BRIC of different products varies. Depreciation of the US dollar has promoted the China’s export of HIGH products to other BRIC countries, the China’s export of MID products to India and Brazil, the China’s import of ARG products from Russia. Depreciation of dollar has curbed the China’s import of ARG products from India and Russia. Based on these findings, the study suggests that:(1) there are very wide space in the trade and cooperation between China and other BRIC countries, so China should enhance bilateral trade reciprocity.(2) As the effects of dollar on the trade between BRIC countries are complex, the BRIC should actively promote local currency to be the settlement currency.(3) Considering that the bilateral trade patterns of different BRIC countries differ, in terms of making trade policy, China should base on the differences.