The Impact Of RMB Exchange Rate Fluctuation On China 's Grain Trade

After World War II, with the deepening of the economic globalization and the development of Multi-National Corporations, Chinese economy has made remarkable achievements under the reform and opening up policy. The double-digit economic growth rate, huge foreign exchange reserves and long-term trade surplus have created a miracle in the world. However, after entering the 21 st century, economic and political problems occur frequently around the world. The Asian financial crisis, the Iraq war, the food crisis, the American subprime mortgage crisis, the European debt crisis and so on, are all added to the world’s economic and political instability. As the leverage to adjust the domestic economy, the exchange rate is of great importance to the country’s international trade, foreign exchange, and the overall domestic economy. Since the establishment of the PRC, we have experienced several exchange-rate reforms because of the imperfection of Chinese market economic system and the defect of the exchange-rate system. As a result, the RMB exchange rate has gone through violent fluctuations. In 2003, Japan’s finance minister proposed to revalue the RMB exchange rate on the pretext that the RMB is devalued during the OECD meeting. Although the proposal was rejected, the appreciation of RMB has become a hot international economic topic all over the world. Later, in order to protect the domestic industries, the United States and some European countries all require the appreciation of RMB. In July 2005, People’s Bank of China reforms the exchange-rate system again, which is a market-based, managed floating exchange-rate system. In the following year, RMB appreciated 4%.In 1994, American scholars Lester Brown published the article "Who will feed China?", he thought that by 2030, neither China nor the whole world is able to meet the Chinese huge demand for grains. At that time, China will face grain crisis. As the saying goes, "Hunger breeds discontentment", the grain is an important strategic material to a country’s economy, politics and military affairs. In recent years, China is under great pressure to meet the huge demand for grains domestically, which is influenced by the shrinkage of the arable land, the water and the huge population. The change of exchange rate will affect not only the grain trade but also its production and its security. Therefore, the research about the impact of RMB exchange rate on grains has vital significance to the economic development and political stability of China.Under the background of RMB appreciation, this paper discusses how the change of RMB exchange rate affects the Chinese grain trade. This paper is divided into six parts: the first chapter is the introduction. It focuses on the research background and the significance of the article, the content of the study, methods, innovation and insufficiency, as well as the literature review. The second chapter is the theoretical basis, which describes the related theory used in this paper from home and abroad and the definition of exchange rate and grain. The third chapter introduces the situation of RMB exchange rate and the grain. This chapter is divided into two parts, the first part shows the course of the RMB exchange-rate reform in China, the present situation of RMB as well as the reason of its appreciation, the second part first describes the status of China’s grain trade as a whole, then analyze the four major grains(wheat, maize, rice, and bean) in detail, finally analyzes the factors influencing the export and import of them. The fourth chapter analyzes the impact of exchange rate on China’s grain trade in theory from positive and negative aspects. The fifth chapter is the empirical analysis, and it uses the annual statistical data from 1994 to 2014. The analysis first establishes a model, then use ADF and cointegration to test the stability of the collected data, and finally operates in Eviews 6.0 software to judge the impact of exchange rate changes on wheat, soybean, corn, and rice. The sixth chapter is about the conclusions and implications. It concludes the results of theoretical and empirical analysis and put forward some suggestions.