| Perfecting the forming mechanism innovation of RMB exchange rate is the internal requirement for setting up and perfecting the socialism market economic system, and for making the best use of market's basis function in resource allocation. It is also a important consisting part of deepening economic and financial system reform, and perfecting macro-control system, which confirms to our long-term interests and fundamental interests, is in favor of carrying through the scientific development view, is very important for promoting the overall coordinating and sustainable development of economic society. On July 21, 2005, People's Bank of China released the announcement of exchange rate mechanism innovation, in which, it is decided that the exchanged rate system of fixed simplex USD will exit and controlled or administrated floating exchange rate system by referring to basket currency will enter. Subsequently, people's Bank of China publicized the major currency consistence of a basket of currencies and announced that the floating scope of exchange rate will be broadened. However, our country did not disclose any technical indicators of basket currencies, e.g. in what principle to choose currencies; in accordance with which, trade volume or trade elasticity, to set the weight of currencies; how much is the weight of each currency; which shall we regard, whether stabilizing the nominal effective rate of RMB or stabilizing GDP or price of commodities, as the target, etc. In this way, to analyze the weight of various base currency in our RMB currency basket and the running characteristics of new exchange rate mechanism may not only be helpful to make a accurate description upon the running posture of macro-economy, but also evaluate and analyze reasonably and logistically to the performing effect of exchange rate policy, and further may provide a useful reference standard for establishing a properly an exchange rate policy.Further, opening the exchange rate of economy is a most important resource allocation price. The imbalance of or error-evaluation to the exchange rate broke both the outer and inner balance of economy. It may bring a serial of adverse effects for the stability of domestic macro-economy and sustainable economic growth. The imbalance of current RMB exchange rate shows mainly that it can not reflect the relationship between our country and the relationship between major trade partners as well as relative technical progress changes can not maintain the inner and outer balance. The actually effective RMB exchange rate index and overestimation of currency value will detract from the investment; and low estimation of currency value will damage economic growth.This paper sums up the relative studies and research to the exchange rate in Chapter 1. Firstly, starting from the international economy, from newly raised market and the exchange rate system of transformed economies, summarizes and analyzes the rule of global newly-arisen market and transforming of exchange rate in transformed economies; Secondly, analyzes comprehensively to the study of choice range, opportunity and procedure, and innovation program of RMB exchange rate system. The conclusion is that China should set up, step by step, a set of more flexible RMB exchange rate policy.Secondly, the conclusion of this chapter, on the basis of summing up current domestic and foreign research theories and study methods in respect of the actual exchange rate of our country's RMB balance, is that, the idea in which applied to the current equilibrium effective exchange rate of RMB is still the theory of behavior equilibrium effective exchange rate and the theory of equilibrium effective exchange rate in developing country, which considers thoroughly the endogenous and equilibrium effective exchange rate think that what decides the equilibrium effective exchange rate in medium and long period is a serial of basic economic factor's variation. Therefore, the reckoned result confirms better to actual economic situation. Meanwhile, they mainly use regulation method to set up demonstration equation, which not only reduce the working volume but also increase the reliability of model estimation as well as strong operability.Chapter 2 recalls the history of RMB exchange rate policy and defined clearly the conception and characteristics that our country refers to basket currency, analyzes the reasons, and advantages & disadvantages that our country makes reference of basket currency exchange rate system, by comparing with and analysis to the fixed basket currency, and finally, compared with Singapore exchange rate policy and new exchange rate policy of our country. The result shows that RMB referring to basket currency system is a brave innovation/creation of our country's currency authority in respect of exchange rate policy. It is correct to choose present opportunity to forward exchange rate policy innovation. A basket currency system may avoid effectively the shock brought by the exchange rate change; realize the relative stabilization of exchange rate and in favor of transition to more flexible exchange policy.In Chapter 3, on the basis of referring to foreign research result and the consistence of RMB basket currency publicized by the Chinese central bank, and under the target of steady trade, considering of the influence of foreign debts and foreign direct investment factors, it designs upon the weight of various currencies of RMB currency basket. The result shows that the proportion of all countries'currencies in Chinese basket currencies should be: US dollar standing 42.78%, Yen 22.41%, Euro 14.97%, KRW 6.93% and other currency approximately 13%. Such design plan gives attention to the pluralism of policy target as well. It is more objective and actual than the simplex trade weight for designing the basket currency system/policy in respect of inner and outer balance. Secondly, this paper, by using of mathematic model, analyzes the calculation to the basket currency and actual exchange rate by comparison. The result shows that, in one side, the fluctuation margin of simulating value of RMB against US dollars is enlarged obviously and the fluctuation is frequent. While the change extent of nominal rate is much smaller than the change extent in accordance with the simulated exchange rate, almost low down in a line. That is to say, the way that RMB refers to basket change is more gentle and smooth. On the other hand, the change trend/direction of simulated exchange rate is as same approximately as nominal rate, both of them reflects the trend/direction of RMB appreciation against USD, only the degree or scale is different. This proves that our country referring a basket currency exchange rate policy is playing a roll step by step and approaching to fixed basket exchange rate system.In Chapter 4, this paper uses regression model and analyzes the running characteristic of our new exchange mechanism system. The result shows that, in short period, our under-controlled floating exchange rate policy which"refers"to basket currency may be deemed, in some degree, as the fixed exchange rate system to which USD is referred. Meanwhile, this paper, by using of Chow, checks and analyzes the structural changes that may arise in RMB exchange rate policy. The result shows that RMB exchange rate policy has changes in structure from March 6, 2006. KRW and Singapore Dollar have showed obvious influence in RMB basket currency. The innovation of RMB exchange rate policy is not static, but a dynamic and step-by-step process.In Chapter 5, it introduces in the relative technical progress indicators, calculates the current actual balance exchange rate of RMB, analyzes the degree of current RMB exchange rate imbalance and confirms the balance exchange rate level on the basis of consideration of the influence of custom tax rate in our country. The estimated result shows that, from 1980s, the actual effective exchange rate of RMB has been deviating from the contrail of essential RMB equilibrium real exchange rate for a long time, which behaves as the imbalance of actual RMB exchange rate. Especially the actual effective exchange rate began to keep in the low-evaluation state since 2003, and the degree of such evaluation is to be extended in tendency. Of which,å…¶the low-evaluation rate in 2004 and in 2005 have reached to 13% and 15.3% respectively. Additionally, relative technical progress and foreign exchange reserves increase are also the main factors for promoting the appreciation of Chinese equilibrium real exchange rate, and which are also the relatively special or unique promoting factors for the appreciation of Chinese equilibrium real exchange rate.Our country has achieved greater effect upon exchange rate policy in macro-control process since the reform and opening; meanwhile, rich experiences are also accumulated as of the decision making and operation of exchange rate policy. However, our country is still in the key stage of economic system reform, therefore, it is necessary to improve further the scientificity, efficiency and forward looking of making decision upon our exchange rate policy. The study in this paper not only may provide an important reference for the exchange rate regulation/adjustment by government and currency administration authorities, but also may provide useful theoretical support and experience accordance for perfecting RMB exchange rate forming mechanism innovation or reform, for improving scientifically the decision making of exchange rate policy and strengthening the regulatory capacity to macro-economy. It is valuable for both theory and operation significance.
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