The Determinants of China's Trade Balance

摘要

This paper investigates the determinants of China's trade balance by using cointegration test and error correction model approach. The empirical results show that accumulated foreign direct investment and world income have a significant influence on China's trade balance. They also provide support to the idea that RMB depreciation doesn't affect China's trade balance significantly. Therefore we must focus our considerations on some policies and measures of expanding domestic demand and controlling foreign direct investment more than revaluation of RMB only.