Study on the Impact of RMB Exchange Rate Changes on China-Japan-Korea Commodity Trade

Abstract

With the development of economic globalization, the connection between countries has been continuously strengthened. The Chinese government is currently implementing a series of policies to adjust the import and export structure, cultivate the international competitiveness of import and export enterprises, and promote the steady growth of foreign trade. This paper investigates the relationship between RMB exchange rate fluctuation and commodity trade between China, Japan and South Korea through theoretical and empirical analysis. Firstly, the paper sorts out the mechanism of exchange rate changes affecting trade, and then discusses the trade process and development prospects of China and Japan and South Korea. The empirical analysis is based on the PLSR partial least squares model to investigate the relationship between exchange rate changes and China-Japan-Korea merchandise trade. The empirical results show that GDP has a low impact on the trade between Japan and Korea and China, and in contrast, for every 1% increase in the real exchange rate, the import and export volume decreases by 0.4% and 0.14%, respectively, with a positive contribution relationship. That is, the devaluation of the RMB will boost the import and export commodity trade between China, Japan and Korea. Finally, for the impact of RMB volatility on trade, the author gives appropriate advice to local governments.