The Comparative Study Of Exchange Rate Arrangement And Its Effect On The Trade And FDI During The Transition Between China And Russia

After the global financial crisis in 2008, the world economy into the depth adjustment period of the post-crisis. Countries around the world make efforts to develop economy, at the same time, they also depth reflect on the global financial crisis. International economic imbalances is one of the problems. Exchange rate, as the ratio at which one currency can be converted into another currency, is an important instrument for achieving the internal and external balance of an economy. And it also is the most direct and most effective means of regulating the international economic competition relationship. After the breakdown of the Bretton Woods System in 1973, large exchange rate movements appeared in the floating exchange rate system, and the growth in world trade had a significant slowdown, which motivated the study of the impact of exchange rate volatility on world trade. How to better play the exchange rate’s readjustment of the trade and investment test the validity and the rationality of the transitional countries exchange rate arrangements. This also an enduring subject in academic research area.In recent decades, the world economy develops towards globalization rapidly. The liberalization of capital flows, the great increase in the scale and variety of international financial transactions and trade, which would increase or reduce the impact of exchange rate volatility on world trade in different directions. As a representative of the radical transition. Russia’s economic transition has more than 20 years. When most people are focusing on Russia has made how much progress in the process of market economy, we need to keep it more objective and clear understanding. Currently, Russian modernization development goals is transition from energy economy to innovative economy. Therefore, the Russian government has adopted a series of policies, including the exchange rate adjustment. Although Russia’s economic transition in general is not successful, but it is undeniable it’s reference significance to China in some specific economic policy. Since the reform and opening up from 1978, China has gradually stepped onto the path of gradual transition and the development of socialist market economy has made brilliant achievements. Beginning form July 21st,2005, China implemented a regulated, managed floating exchange rate system based on market supply and demand and in reference to a package of currencies. With the deepening of RMB exchange rate reform, an increasing fluctuation of RMB exchange rate will exert great impact on China’s economy and international trade. Meanwhile, the huge foreign trade surplus has also brought great pressure on the RMB exchange rate formation mechanism reform, which is the potential risk to China’s economic development. So, making comparison the exchange rate system arrangement to the trade and FDI impact between China and Russia is of great significance.Based on the above research background and significance, paper main content is as follows:the first part is introduction, mainly discusses the research background and significance, thesis framework, literature review, and innovation and deficiency of this paper. The second part is the exchange rate system theory. In this part,we retrospect the exchange rate system choice theory and exchange rate affect trade theory. The third part is the comparison of the exchange rate arrangement in the process of transition between China and Russia and the objective necessity of the choice of exchange rate. The fourth part is the comparison analysis of exchange rate system arrangement influence on trade between China and Russia. The fifth part is the comparison analysis of exchange rate system arrangement influence on investment between China and Russia. The sixth part is conclusion and inspiration.Through the comparative analysis the influence of exchange rate system arrangement for macroeconomic equilibrium between China and Russia, we draw some conclusions. First, comparing the economy development of the two countries since the transition can be found that a gradual transition way is still the optimal choice. At present, China still be careful to open the capital account. Second, Russia’s domestic currency crisis erupted repeatedly and the ruble exchange rate volatility since transition reminds us that we must be revalued scale and the role of the reserves. Third, by comparing the exchange rate volatility of capital flows and the impact of FDI in given exchange rate arrangement, we draw conclusion that we still needs strengthening the management of capital flows and FDI in the short term. Fourth, through comparison the exchange rate regime’s adjustment and its influence on macroeconomic equilibrium between China and Russia, we found that the more flexible, more elastic floating exchange rate arrangement should be a basic direction of the exchange rate reform in transition countries in the future. Fifth,2014 rubles crisis remind us again that we must comprehensively deepen financial reform and opening to the outside world. In a word, we must deepen the financial and currency reform in order to better adapt to economic globalization and financial liberalization.