Research On The Chinese Practice Of Exiting Form Pegged Exchange Rate In The Reference Of International Experience

After the system of Breton disintegrated in 1973, a lot of developing countries chose the regime of pegging exchange rate, the financial crisis and Economic crisis break out successively in these developing countries since1990s. For this reason, many researchers maintain the regime of pegging exchange rate is an important reason of economic crisis, thus, studies on how to exit from the regime of pegging exchange rate in the developing countries become one of hot topics in international finance. After the Asian Financial Crisis in 1997, the trend of RMB pegging to U.S. dollar was becoming more and more obvious. However with the development of economy and enhancement of the capital circulation in our country, the drawbacks of the regime of pegging exchange rate appear little by little. On July 21, 2005, our government reformed the exchange rate regime, took the first step of exiting from the regime of pegging exchange rate. Since then half of one year past, how does it process? What kind of supporting measures are needed? All of these are still unresolved. The writer wants to borrow some International experience to give some advice to the current practice of exiting from pegged exchange rate in China.Main content and viewpointsThis article includes the foreword and the main text. There are five parts in the main text.The foreword introduces the background, theme, signification, basic disciplines, analytical approaches, main idea and structure of this article. As a backdrop, the function of foreword is helping to give elementary impression of the article.Chapter1,as a leading part, is in order to raise the question. It is composed of two sections. Section1 introduces the classification of exchange rate regimes by IMF in 1999and then studies the trends in the distribution of regimes through out the word, which show that increasing number of countries have exited to a more flexible regime. Section2 introduces the theory of exciting strategy. Chapter2 studies the international experience of exiting form peg, which are falling into two categories: developed countries'and emerging market countries'.Our study confirms that emerging market countries need to consider adopting more flexible exchange rate regimes as they develop economically and institutionally, we also find that fixed or relatively rigid exchange rate regimes have not performed badly for poorer countries. For countries that have relatively limited financial market development and relatively closed capital markets, fixed exchange rate regimes appear to offer some measure of credibility without compromising growth objectives——with the important proviso that monetary policy must be consistent with avoiding a large and volatile parallel market premium. As countries develop economically and institutionally, there appear to be considerable benefits to adopting a more flexible exchange rate system——although, of course, our analysis only provides a general guide and should not be interpreted as a one-size-fits-all prescription. For developed countries that are not in a currency union(or headed toward one), relatively flexible exchange rate regimes appear to offer higher growth without any cost in anti-inflation credibility-provided they are anchored by some other means such as an independent central bank with a clear anti-inflation mandate.Chapter3 studies current practice of exiting form peg in China. It is composed of 3 sections. The first section introduces the background and the main reason why peg is not suitable to current economy in China. Second section reviews the main content of exchange rate regime reformation in July 21, 2005 and the main characteristics of the new exchange rate mechanism. Third section discusses the remained problems of this new exchange rate mechanism.Chapter4 make an empirical analysis on the new exchange rate regime to see whether our exchange rate regime has exited from the peg to a more flexible exchange rate regime.Chapter5 make a comment on Chinese exiting strategy and give some advice to the flowing exiting process, which are borrowed from the international experience.