The Research On The Reform Of China's Current Exchange Rate Regime

A perfect exchange rate regime can promote international trade and the flow of capital. Since the reform of the exchange rate of china in 1994, china began to practice the managed floating exchange rate regime based on the supply and demand in market. But from the end of 1995 to now, China's exchange rate regime has been a actual fixed exchange rate regime unitary peg to the dollar. This arrangement is achieved by capital control and the frequently interfere of the central bank to the foreign exchange market. The unite of the fixed exchange rate regime peg to the dollar and the capital control is beneficial to attract foreign capital and promote export, but it at the same time weakens the effects of the money policies and is disadvantageous of the RMB exchange rate mechanism formed by the market. As China beginning to open the capital account, it will be more harder to stick to the fixed exchange rate regime peg to the dollar, and urgent to reform China's current exchange rate regime. Based on the specific state of China, through comparing the merits and shortcomings of the fixed exchange rate regime, the paper analyzes the necessity of reforming the current exchange rate regime, and advances specific suggestions on how to reform.The basic structure of the paper is as following:The first chapter elaborates the exchange rate policies theory, mainly discusses the interior and exterior factors of deciding exchange rate and the factors considered on which exchange rate regime should be adopted.The second chapter introduces the specific state of China, firstly discusses the evolution of the exchange rate regime of China, then discusses the main content and fundamental framework of the current exchange rate regime, and comments overall the current exchange rate regime.The third chapter systematically analyzes the defects of the current exchange rate regime of China, mainly discusses that the current exchange rate regime weaken the effects of the money policies and results in cost on the development of economics, and points out that the current exchange rate regime is not suitable to the background of open the capital account, so it is necessary to reform it.The fourth chapter , based on the specific state of China, proposes some suggestions on how to reform the current exchange rate regime.The paper tries to bring forth new idears as following: fisrt, to advance the steps on how to reform the current exchange rate regime, the paper considers at full points of view, and compares the different opinions of the cademic circles, at last summarizes a set of reform steps comparable consummate; second, instead of considering the target zones regime as a independent regime, the paper use its advantage to consummate the managed floating exchange rate regime.Because of the limited knowledge of the author, for example, the research on how to decide equilibrium real exchange rate is not thorough, the insufficient analysis of consummating the management of the capital items, this paper is far from perfect. I will try my best to consummate it in the continuous research.