Abstract:My empirical findings show that there is no long-run and stable cointergrating relationship between U.S.-China trade deficit and RMB'S exchange rate, and it is impossible to resolve U.S.-China trade deficit issues with an attempt to have RMB'S exchange rate floated. U.S.-China trade deficit concentrates mainly on manufactured goods by material, machinery and transport equipment, and miscellaneous manufactures articles.The true reason of U.S.-China trade deficit is that China takes comparative advantages of labor-intensive and resource-consuming products,while the U.S. gets no comparative advantages of high-tech products owing to export control policy against China. Moreover,U.S.-China trade deficit is partly attributed to the differences between the methods of U.S.-China trade statistics. Again, U.S.-China trade deficit is positively related to the U.S.GDP.and China's Gdp respectively,but the effect of RMB'S exchange rate is rejected because of an insignificant variable, which means no effect on U.S.-China trade deficit. My proposal is that the U.S. should eliminate gradually export control policies against China on high-tech products in order to reduce U.S.-China trade deficit. Furthermore, the U.S. needs revising the divergences of trade statistics methods against China. As for China, while encouraging export, China should pay an emphasis on import from the U.S.,and adopt trade policies of puling import by export and promoting export by import.

Key words: U.S.-China Trade Deficit, RMB's Exchange Rate, Goods trade by classification, Trade of High-tech Products, and Export Control Policy

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