The relationship between real effective exchange rate (REER) of RMB from 1997 to 2006 and trade surplus between China and other trade partners was discussed using cointegration vector autoregression in the paper. The study shows that there exists a long-standing and stable relationship between REER of RMB and trade balance; the fall of the real effective exchange rate of RMB is one of the reasons of the increasing trade surplus, however, the influences it brings are less than domestic GDP and trade partner's GDP do. So, increasing the flexibility of the exchange rate of RMB, broadening the exchange rate's float space between RMB and dollar are a necessary part of the package policies in solving the trade surplus.
Key words: RMB appreciation, real effective exchange rate, trade surplus, cointegration vector autoregression
Résumé: La relation entre le taux de change réel (TCR) de RMB de 1997 à 2006 et le surplus commercial de la Chine avec les autres partenaires commerciaux est discutée, en utilisant l'autoregression de vecteur de cointegration, dans l'article présent. L'étude montre qu'il existe un lien stable de longue date entre TCR de RMB et la balance commerciale, et que la baisse de TCR de RMB est une des raisons du surplus commercial croissant. Néanmoins, ses influences sont moins importantes que celles de PIB de notre pays et des partenaires. Ainsi, renforcer la flexibilité du taux de change de RMB, élargir l'espace de flottement du taux de change entre RMB et le dollar sont nécessaire pour résoudre le problème de surplus commercial.
Mots-Clés: appréciation de RMB, taux de change réel, surplus commercial, autoregression de vecteur de cointegration
Exchange rate (REER) of RMB shows a stable appreciation trend from 2005 when it began to reform. At the same time, trade surplus and foreign exchange reserve showed all-time upswing continually. The issue of exchange rate of RMB is a focus for USA up to the present. A new bill drafted out by Democrat conscript fathers Chars, which wanted RMB to appreciate faster. In 2007, trade surplus in the first quarter were 464 hundred million dollar that were 231 hundred million dollar more than in same term in China, so big financial, organizations in the world considered that the trend will bring RMB appreciation more pressure. At the same time, center bank indicated that one of the work pivots is to enhance the flexibility of RMB, and to keep the exchange stable in a reasonable level. Zhou XiaoChuang, the president of People's Bank of China, thought that China will expand the flexibility of RMB according to go-aheadism, gradualness, and controllable principle, and the exchange rate will be determined via supply and demand in the market. It is obvious that the market holds an important position more and more in case of creation of mechanism of RMB exchange rate; with the continual increment of foreign exchange reserve the pressure of RMB appreciation will keep. Whether RMB appreciation can settle trade surplus is the study subject in the paper, the long-term and short-term relationship between real effective exchange rate (REER) of RMB and trade surplus was investigated, and the effect and trend of RMB appreciation was appraised.
1. REFERENCE REVIEW
Traditional income-expenses theories think, when M-L condition is meted, it is that the sum between the demand elasticity of imported commodity and that of exported commodity is more than one, the money appreciation will bring the change of the relative price, which will lead to change of the quantity of the imported commodity, ultimately, it will bring the income and expenses of trade to change. At the same time, owing to the "J curve effect" in real economy, in initially, exchange rate appreciation can change the income and expenses of trade due to the hysteresis of exchange rate transfer; after a while, the income and expenses of trade will become deteriorate gradually.
Many scholars in the world analyzed instructively the relationship between the trade surplus and exchange rate in China. …