Study On The Phenomenon Of The External Appreciation And The Internal Depreciation Of RMB

Since the reform of exchange rate system in2005, there is a phenomenon thatappreciation external and depreciation internal are coexisting in same time for RMB,which make the different trends for internal and external value. Moreover, thetendency has continued to expand. As a new currency phenomenon, it is inconsistentwith the classical economics theory. We call it as "the mystery of the RMB value".Study on the phenomenon of the external appreciation and the internal depreciation ofRMB, not only helps to understand the macroeconomic impact of the price andexchange rate fluctuations, but also give us reference value for appropriate monetarypolicy decisions and practice. In addition, how to select the appropriate exchange ratesystem in China has important theory significance and policy reference for achievingthe anti-inflation target and the macroeconomic development of stability and healthydevelopment.In this paper, we try to analysis and explain the mysteries. First, we review thetrends of exchange rate and price after the reform of exchange rate system of RMB.We find that this result is caused by Balassa-Samuelson effect, double imbalance ofboth at home and abroad, and the China’s irrational foreign economic policy. Thisphenomenon may have a negative impact on economic growth in China. So ourgovernment should maintain a stable RMB exchange rate in the short term, and adjustthe foreign exchange reserve structure and foreign trade policy reasonable. Moreover,we should also expand domestic demand to maintain the internal and external balanceof Chinese economy in the medium and long term. At the same time, the governmentgradually promote the internationalization of RMB.