A Study On The Impact Of The Sino-US Trade War On The Rate Of Return And Volatility Of The RMB Exchange Rate

In 2018,China faced a grim situation in which Trump provoked the trade war.The trade war is rooted in the deep imbalance in the bilateral trade structure,increasing trade surplus of China to America and the socio-economic reality in America with polarization of employment and increasing income distribution gap.The Trump administration has ignored the huge service trade surplus of the US to China and launched anti-dumping and countervailing investigations against China on the grounds of the large trade deficit of goods.It attempts to suppress the appreciation of the RMB and to repeat the trade war like Japan and US in the 1980 s.Since the Sino-US trade war has been going on for more than one year,the RMB exchange rate market has experienced significant fluctuations.This paper firstly reviews the path of Sino-US trade war since August 2017,analyzes the volatility of RMB exchange rate and the simple relationship between yield and Sino-US trade war.Secondly,the paper theoretically analyzes the mechanism of Sino-US trade war affecting RMB exchange rate,and puts forward some basic hypotheses.Third,the paper constructs the Sino-US Trade War Impact Index,and further subdivide it into the trade sanctions impact Index and trade negotiation Impact Index.Based on the Event-Study Analysis method and the EGARCH model,the paper empirically analyzes the impact of Sino-US trade war on the yield and conditional volatility of the RMB exchange rate.It turns out that trade war,trade sanctions and trade negotiations have significantly affected the conditional volatility of the RMB exchange rate,but only trade war has affected the yield.Finally,based on the research results,this paper puts forward some useful policy suggestions from the angle of Sino-US trade war and stabilizing RMB exchange rate.