RMB Exchange Rate ,Foreign Trade and Functional Income - Based on CGE Model Simulation

RMB exchange rate has been in an appreciation state before January 2014. While after that, RMB exchange rate has been beginning to appear frequent fluctuations. The exchange rate fluctuations will directly affect a country's foreign trade, and further affect the functional income. The paper simulates RMB exchange rate fluctuations' impact on the import and export trade and functional income in China on the basis of building a CGE model. The simulation results show that Chinese import and export trade and functional income have a positive relationship with the exchange rate fluctuations. The rising exchange rate is more favorable to the increase of imports and exports in services trade. The decreasing exchange rate is more conductive to the increase of imports and exports in agriculture trade and industry trade. Further more, capital factor price is more sensitive to the exchange rate fluctuations relative to labor factor price.