Research On The Impact Of RMB Appreciation On Sino-US Processing Trade

One of the main factors of Sino-US bilateral trade is the uneven trade balance, which means China keeps trade surplus to the USA and this trade surplus has been raising during the last ten years. The favorable trade surplus comes mainly from the processing trade between the two countries. Many factors contribute to the unbalanced trade and the RMB to US dollars exchange rate has been accused as one of the reasons. In fact, the western countries, especially the USA, have been pushing Chinese government to appreciate the RMB to US dollars exchange rate. On the other hand, as the quantities of China's export and foreign exchange reserve have been growing during the last ten years, the appreciation of RMB to US dollars is needed, which is not only helpful for the stability but also for China's economy development. The RMB to US dollars exchange rate has been appreciating since the reform of China's exchange rate policy, but the unbalanced situation has not reversed. How the appreciation of RMB impacts the processing trade between China and USA? Can the appreciation of RMB solve the problems of the unbalanced trade between the two countries? The answer of these questions will be probed into in this study.The present study consists of six parts, which includes an introduction part and five chapters.The introduction part gives a general overview to the present study including the research background, significance of the research, the present research situation at home and broad, the research methods and frames of the study as well as the creative points and drawbacks.Chapter one is a theory guide, which introduces the theories processing trade and the theories of the impacts of the fluctuations of exchange rate on the trade balance. Chapter two analyzes three aspects, the total volume, the main products and the FDI in the processing industry in China, of Sino-US bilateral trade by charts and tables.Chapter three firstly analyses the exchange rate reforms happened in China. In addition, the study analyzes the factors which result the appreciation of RMB, and the impacts of RMB appreciation on the processing trade between the two countries. Chapter four is the empirical research. With the help of the ADF unit root test, co-integration analysis, the granger causality test and the VECM test, the author analyzes the long term and short-term impacts of RMB appreciation on the processing trade between China and USA.Chapter five provides some suggestions for the RMB exchange rate reforms and the trade policies in China.