Research On The Choice Of RMB Exchange Rate Regime

The exchange rate is the tie for a country to make economic trade,the exchange rate system is an important part of the economic system,so an appropriate exchange rate system is one of the most important elements to guartantee a country's economic growth.Since 2001 China has entered the WTO,as our country's economic continue to open up,our economic is more integrated into the world economic system,which made the domestic economy inevitably face the volatility impact of domestic and foreign market.Since late 2002,the international media led by the U.S.and Japan launched a wave of appreciation of the RMB.On July 21st 2005,China announced the implementation of managed floating exchange rate system which is based on market supply and demand system and adjust with reference to a basket currency.The measure increase the fluctuations and the flexibility of exchange rate but RMB exchange rate system still exsits many problems.The key problem is that we should choose what xchange rate system to prevent fluctuations in the global economy when our economy is in a further step towards opening up,especially the impact the international financial crisis exert on China's macro-economic the last two years,so a correct and efficient exchange rate system is very important to the development of economic.In the background of this international environment we make a disscussion on the rational selection of China's RMB exchange rate system in this article.Firstly,we introduce the basic problems about exchange rate system,describe the concept and basic content of the exchange rate system,elaborate the history of international exchange rate system,summarize the type of exchange rate system from the historical development,point out that the selection of exchange rate system is very essential,and the country should choose an appropriate exchange rate system based on its own national conditionsSecondly,we describe the development of theory about the exchange rate system selection.After reviewing the theory we can find that discussion on exchange rate system and related policy are changing over time to time,very few can separate from the characteristics of international financial.At first in the condition of relatively closed capital market,relatively the external impact is not so significant,so countries focused on studying the role exchange rate system play in stabilizing.In the late 1990s, the strengthening of capital flows make the issues highlighted by theoretical literature change.Discussion began to focus on the role different exchange rate system play in external shocks absorpting or the risk preventing.Although scholars did not form a unified view about the problem of the exchange rate system selection in the process of economic development,it is certain that we should make the selection rely on our own national condition.Because the best exchange rate system is changing with the conditons of country's development changing,so we should choose our own specia exchange rate system which is suitable to the economic development。Therefore,we should select the appropriate RMB exchange rate system based on China's national conditions and the sustainability and applicability of different exchange rate system in the different stages of development.Thirdly we make an analyse of the RMB exchange rate system,selection,review the evolution process of the RMB exchange rate system,analyze the formation mechanism of the RMB exchange rate system and the advantages and disadvantages of the operation of the current RMB exchange rate system.The new RMB exchange rate formation mechanism has operated smoothly for four years.Based on the principles of initiative,controllability and gradual progress,PBC improve the managed floating exchange rate system constantly,as a result the flexibility of the RMB exchange rate increased obviously,which promotes the economic restructuring, industrial upgrading and economic growth pattern changing,and enhance the flexibility of the operation of macro-economy.But under the pressure of the international financial crisis,the huge trade surplus and the inflation,the pressure of the appreciation of the RMB remains unabated,so the RMB exchange rate is stil in a constantly rising trend.This bring higher challenge to the current RMB exchange ratesystem.Meanwhile there are a lot of leaks in the RMB exchange rate system,we should improve the current exchange rate system in order to keep pace with the development of economic situationFourthly,we analyse the medium-term selection and policy recommendations of China's exchange rate system.We make a further analyse about the necessity and feasibility of implementating exchange rate target zone in China,mainly based on the experiences and lessons of developed countries.Many favorable conditions such as rapid economic growth,gradually opening up of capital project,adequate foreign exchange reserves,the upside down and reduce of the spread between China and foreign countries,the increase confidence in China government and RMB from home and abroad etc.,promote us to implement exchange rate target zone.With the advantages of both fixed exchange rate system and the floating exchange rate system, exchange rate target zone avoids the negative impact brought by one-way movement of RMB exchange rate,and strengthen the autonomy and flexibility of the Central Bank exchange rate policy and national monetary policy.Lastly,we analyse the long-term selection and policy recommendations of China's exchange rate system.Any exchange rate system has its own advantages and disadvantages.So the exchange rate system selection should be a dynamic process,and we should make adjustments accounding to the change of domestic economic situation and the international economic environment.The long-term goal of China's RMB exchange rate system is to move towards to freely floating,because,as for the member of WTO,the implementation of freely floating can effectively isolate external impacts,and maintain the independence of monetary policy and the free flow of capital.We should make the RMB exchange rate system move towards to really freely floating in the condition of the stable macroeconomic situation,the effective macro-control ability,a sound micro-economic subjects etc.In addition the government should also make some relevant systems to cope with the development.