Effect of RMB Exchange Rate on National Foreign Trade Balance of China: An Empirical Analysis Based on the Data Ranged from 1995 to 2007

Based on the collection of annual data ranged from 1995 to 2007,co-integration analysis was carried out and autoregressive distributed lag model was established to evaluate the relationship between RMB exchange rate and national foreign trade balance of China.The result indicated that the national foreign trade balance of China was significantly affected by RMB exchange rate of the last year.There was a J-curve effect in RMB exchange rate influencing trade balance,and the time-lag effect is 1 year.The appreciation of RMB has more positive effect on the trade surplus of the current year,while less negative effect on that of the next year.The appreciation of RMB,hence,has net positive effect on trade surplus.