Determinant Factors of RMB Real Exchange Rate - Based on Computable General Equilibrium Model Analysis

International pressure to revalue RMB stems in part from the expectation that rapid economic growth should be associated with a real exchange rate appreciation. This hinges on the "Balassa-Samuelson hypothesis" under which economic growth, stemming from improvements in traded sector productivity, causes non-traded prices to rise.RMB real exchange rate has shown no long run tendency to appreciate.In this study,we introduces a generalisation of the 1-2-3 (Computable General Equilibrium, CGE) model to empirical analyse determinant factors of RMB real exchange rate. The main results are as follows: "The Balassa-Samuelson effect" would not be entirely observed because of more rural surplus labors in China. Service sectors productivity growth would place downward pressure on real exchange rate,if labour mobility between the rural and industrial sectors is inferior to that between the rural and service sectors.