An Empirical Analysis of the Relationship between RMB Exchange Rate and Sino-US Trade Imbalance

Abstract

With the development of Sino-U.S. trade, the trade friction has also intensified. Due to the continuous expansion of China's trade surplus, the United States believes that the serious undervaluation of the RMB is the main reason. The paper constructs an empirical analysis model, selects quarterly data from the first quarter of 2010 to the fourth quarter of 2017, and empirically analyzes the real exchange rate and the Sino-U.S. trade using methods found that there is a long-term equilibrium relationship between the trade surplus and real exchange rate. Finally, this article proposes policy suggestions on how to ease the trade imbalance between China and the United States.