The Cultivation And Management Of China's Foreign Exchange Market

The development of Foreign Exchange Market in China is of vital importance to propel the reforms on full convertibility of RMB, achieve the completeness of exchange rate mechanism, enhance the effeciency of foreign exchange resource allocation and improve the result of marcoeconomic adjustments and controls by the Chinese government. In order to meet the surging demand from new rounds of market reforms and opening to the outside world, it is required to speed up the process of cultivating the domestic Foreign Exchange Market in China. With the economy transformation, the development of China's Foreign Exchange Market should follow the "Government-driven" procedure instead of "natural evolution". The key to market development is how to foster and manage the foreign exchange market through appropriate government intervention.From the perspective of the present conditions and future requirements, the development of Foreign Exchange Market in China should consider the followings: First of all, the Chinese government should play an active role to stimulate the regulation reforms, remove the policy barriers, and expand the room for the market development. The major issue is how to coordinate and promote the full convertibility of RMB as well as establish the rule of Foreign Exchange Market in China.In line with achieving the full convertibility of RMB, several key elements also need to be looked after, including currency exchange rights, degree and scope of RMB convertibility degree of freedom in converting the RMB into foreign exchange and the exchange rates, etc.As for the Foreign Exchange Market, the following elements need to be considered, including market participants, trading instrument, market organization structure, pricing mechanism and the interrelationship between foreign exchange market and other element markets, market supervision and control mechanism. It is the interaction among the above elements that leads to the correlation between full convertibility of RMB and Foreign Exchange Market. From this perspective, in order to foster China's Foreign Exchange Market, it requires to promote the reform on foreign exchange regulations and grow the group of market participants, encourage the trading instrument innovation via the initiation of RMB forward trading. Especially, with the RMB exerting the dominating influence among all the currencies in Asia Pacific Region, we should develop the foreign exchange market to enhance the core competitiveness, and thus take an increasingly importance...