chinese currency

Since the issue of Chinese currency exchange rate against U.S dollar has been capturing widespread attention, the purpose of the study proposed herein is to profit from empirically analyzing the income elasticity and elasticity of exchange rate of gross Sino-US trade and commodities from ten main categories1 by employing quarterly data from 1996 to 2009, aiming to judge whether Chinese currency needs an appreciation or not. Ever since the 1980s, due to its upgrade in industrial structure, the United States have gradually transferred low-tech industries to developing countries including China. Consequently, China’s trade surplus with the United States has increased steadily with the growing trade volume between the two countries from 1996 to 2009, which puts renminbi2 under great upward pressure. Nonetheless, what has been concealed beneath the cover is actually the imbalance of Sino-US trade structure. From this perspective, there is a need to explore the root cause of U.S. trade deficit with China and evaluate the impact of RMB appreciation on Sino-US trade according to economic theory as well as data available. In this proposal, I shed light on the relationship between the exchange value of RMB and Sino-U.S trade by means of some recent econometric techniques designed to evaluate the influence of RMB exchange rate towards Sino-U.S trade structure.
Exchange rate, exerting a profound effect on a country’s export and import in the open economy, is a most essential variable of one country’s economy as well as world financial market. The continued increasing China exports to the world, especially to the United States, spurred a proliferation of economic concerns from US government and academic circles over Chinese currency revaluation. In the past two decades, China’s total exports of merchandise to the U.S. have grown by 87 times and rising from an almost zero percent share in 1985 to a 16.1% share in 2008. Starting from 2001, renminbi has long been under huge