An Empirical Study On How The RMB Exchange Rate Fluctuations Impacts China’s Textile And Garment Export Trade

China is a large country that embraces major trading power. Labor-intensive industry remains an important pillar of China’s economy. Textile and clothing industry serves as an exemplary in labor-intensive manufactures. It has gone through the high-growth period after the opening-up and reform. Its scale has expanded rapidly and export market has developed dramatically. Additionally, it plays an important role in economic growth, employment development and national income. At the beginning of a new economic cycle, China’s economic growth is slowing down steadily with the increasing industry pressure. At the critical stage of economic structure transformation, Textile and clothing industry is facing unprecedented challenge that resulted from the continued appreciation of Chinese yuan(RMB) causing the reduce of competitive advantage in international market and the increasing of raw material and labor costs in domestic market as well as the difficulties in capital turnover and financing.The increasing value of RMB impacted the industry severely following the restart of exchange rate reform in this country in 2010. The appreciation of RMB hurt the Textile and Clothing industry that relied heavily on export. Over the decades, scholars have done extensive and in-depth study on the consequences of RMB appreciation including its effect on national economy and social issues. However, 2014 is the turning point for Chinese Yuan. It started a fluctuation between currency depreciation and appreciation. Nowadays, there are not enough researches about the effect of RMB fluctuation on economy and Textile and Clothing industry.This paper introduces exchange rate formation mechanism, the theory of trade balance and the effect of trade balance caused by currency fluctuation. It analyses the reasons hidden behind the RMB fluctuation and its impact on export and import with the consideration of the improvement for Chinese Yuan exchange rate reform and environment. Furthermore, it gives a brief discussion about the broad environment, features and development of Textile and Clothing industry in China. At the last but not the least, it demonstrates how the fluctuation of RMB affects the export of this industry by empirical approach. This paper also takes advantage of Cointegration test and VECM to explore the relationship between RMB fluctuation and export volume of this industry. It is proven that the fluctuation of RMB serves as the major reason why the changes take place in this field.In addition, the paper gives suggestion regarding the development of Textile and clothing industry and how to respond to the currency fluctuation. It is hoped that the whole industry can seize the opportunities emerge in the process of economic structure transformation, make steady progress and technology advancement, improve the industry qualification and integrated competitive advantage to keep the strength in trade and international rivalry.