The Influence Of RMB Exchange Rate On Sino-US Trade Of Various Types Of Products

In recent years, The United States has been strongly urging the appreciation of the RMB to solve the problem of Sino-US trade surplus. There are lots of scholars studied the relationship of RMB exchange rate and Sino-US trade draw a different conclusion. However, little do we know about the influence of RMB exchange rate on different types of products of Sino-US trade. In this thesis, I analyzed the quarterly data of trade between China and the US from1995to2013. I divided the trade products into resource-intensive, labor-intensive and capital-intensive products based on the HS classification. I introduced the RMB exchange rate into the standard trade gravity model to study the influence of RMB exchange rate on different types of products between China and the US trade. The results show that the RMB exchange rate has positive statistical significant effect on the export of resource-intensive and capital-intensive products, because China’s bargaining power is weak for those two products. The RMB exchange rate has no statistical significant effect on the export of labor-intensive products due to China’s comparative advantage and the small demand elasticity for this product in the US. The RMB real exchange rate has no statistical significant effect on products import, because China has no bargaining power to the import products from the US. But The RMB nominal exchange rate has negative statistical significant effect on resource-intensive products import, because there is no price adjustment for RMB nominal exchange rate. We can clearly see that the effect on export products of RMB nominal exchange rate is larger than the effect on export product of RMB real exchange rate. The results also show that Sino-US trade surplus mainly due to capital-intensive and labor-intensive products trade surplus, while labor-intensive products is not sensitive to the RMB exchange rate. Capital-intensive products is proportional to the RMB exchange rate, but Sino-US trade surplus did not improve after China’s exchange rate reforms and the RMB exchange rate fell nearly30%. To my point of view, the undervalued RMB is not essential reason of Sino-US trade surplus. Therefore, it is not feasible to solve the problem of Sino-US trade surplus through RMB appreciation.