| Abstract | Using both yearly (1994-2011) and monthly (2002M1-2012M2) data for 80 industries of Sino-US trade, we present evidence of “Short-term Heterogeneity” and “Long-term Convergence” characters between Sino-US trade balance and its major influence factors, such as real exchange rate and national income. This result is robust for applying pooled mean group (PMG) to estimate the dynamic heterogeneous panel model, but not for other estimation methods, such as pooled OLS, random effect, fixed effect and mean group. the robust PMG estimation results show that both exchange rate and income elasticity are in line with the classic findings of the elastic analysis, so China needs to introduce market mechanisms to cultivate exchange rate volatility, meanwhile, the U.S. needs to improve the structure of imports and gradually relax the high-tech export restrictions in order to stimulate China's imports, only with joint efforts can both countries achieve the objective of long-term trade rebalancing. |