On The Choice Of Rmb Exchange Rate System

The exchange rate is the ties between a country's foreign economic and trade, the exchange rate system is an important component of the economic system, the appropriate exchange rate system is one of the most important guarantee for economic growth. Since 1999 the foreign exchange system reformed, the RMB exchange rate system has tended to a fixed exchange rate pegged to the dollar system, which create good conditions for China's economic development in recent years. However, as China's economy continues to open up, in 2001 after China's accession to WTO, China's economy to a more in-depth integration into the world economic system, while the domestic economy will inevitably face the volatility shocks of domestic market. Since the second half of 2002, the international media led by the United States and Japan is creating a wave of appreciation of the RMB. Despite on 21st, July 2005, China announced the implementation of a market based on supply and demand, with reference to a basket of currencies to adjust a managed floating exchange rate system, but the exchange rate system of RMB is still the focus of domestic and foreign scholars argument, that the core of the argument is how to choose the correct exchange rate system in the process of China's economic further towards opening up. According to the background of international environment, this paper is to discuss the reasonable options of China's RMB exchange rate system.On 21st, July 2007, the RMB exchange rate formation mechanism has steadily implemented for two years. As the the initiative, controllability and gradual progress in principle, the People's Bank constantly improve the managed floating exchange rate system, the RMB exchange rate flexibility has noticeably increased, the RMB real effective exchange rate increased steadily. After the microeconomic subjects diligengtly adjust and gradually adapt to the managed floating exchange rate system, the ability to avoid exchange rate risk can continue to improve, corporate profits increased substantially. From a macroeconomic perspective, the RMB exchange rate formation mechanism reform promotes the economic restructure, industrial promotion the change of the economic growth mode, raises the financial institutions independent pricing and risk management capability and enhances macroeconomic flexibility. However, due to the pressure from the international word, huge trade surplus, the pressure of inflation and the pressure on the appreciation of RMB remains unabated, rising the exchange rate of RMB into the overall trend.Currently, the present exchange rate system still has more problems. Lack of adequate RMB exchange rate flexibility; RMB appeared "back-monetary phenomenon" - the internal devaluation of the RMB, external revaluation;The current RMB exchange rate system constrain the effectiveness and independence of monetary policy in China; The current exchange rate system caused social capital allocation inefficiencies; Delayed domestic reform of marketization of interest rate; The imperfect foreign exchange market brought the system of the exchange rate great obstacles; the growing foreign exchange reserves increased the difficulty to implement monetary policy, weaken the effectiveness of macroeconomic policies, increased the risk of exchange rate and cause fluctuations in economy. Because of these problems, the RMB exchange rate system is no longer suitable for China's economic development needs, the exchange rate lost its role in macroeconomic regulation and control. All these phenomena show that the expection of RMB revaluation leaded to that the current modest revaluation of the RMB exchange rate has been unable to meet domestic need, the RMB exchange rate system must be reformed to achieve the exchange rate as a tool of macroeconomic regulation and control.Basing on the analysis the status of current exchange rate system and the of the existing problems in china, this paper uses Poirson modle to conduct the Empirical Analysis on the choice of China's current exchange-rate system affecting factors, that pointed out that China's official announcement of a managed floating exchange rate system consisted with a desired exchange rate system drawn from the Empirical Analysis, but in the actual operation of the exchange rate system and the official announcement of a managed floating exchange rate system has the deviations.The proposed revaluation of the RMB exchange rate should be moderate, long-term RMB exchange rate system should choose a managed floating exchange rate system and finally move towards the free fluctuation.In reality, China's economic gradual reform manner has been recieved the international recognition. But in the course of the conversion exchange rate system , this paper think that we should deepen three main areas for reform , which are promoting the building of financial markets, strengthen macroeconomic regulation and control and the reform of the financial system. To improve the RMB exchange rate formation mechanism, to orderly withdrawal the exchange rate system of pegging the single one to the exchange rate system of a basket of currencies, to keep the RMB exchange rate increasing flexibility; To actively promote market-oriented interest rate reform; To nurture a sound foreign exchange market; To promote basic balance in international trade balance and control the growth scale of foreign exchange reserves; To adhere to a robust monetary policy; To raise the standard of regulation; To gradually promote the free convertibility of the RMB under the capital account, to realize the internationalization of the RMB to make the exchange rate system go to a real managed floating exchange rate system, eventually float freely.