The Political Analysis Of RMB Exchange Rate Regime Evolvement

With the exacerbation of global economy imbalance marked by imbalance of payments since the end of 2002,the fixed exchange rate of RMB has become the focus of the world.External presssure from USA,Japan and Euopean Union is very big, and comments on exchange rate manipulation from internaional media are heaped on Chinese government.Obviously,it's diffcult to use pure economics to explain why the same fixed exchange rate of RMB, which was praised greatly five years ago,suffers from so much criticism now.The reason lies in non-neutral exchange rate policy,that means a certain exchange rate policy will bring different economic consequences to different interest groups and result in conflicts between them,so in reality the choice of exchange rate regime is usually the result of game among various economic and political powers,and essentially exchange rate is an issue in political economics,especially in international political economics.In order to answer lots of questions on RMB exchange rate regime and clarify the future development way of RMB exchange rate regime, this article has combed evolvement of RMB exchange rate regime through analytical procedure of politics and explored factors influencing the choice of RMB exchange rate regime from historical experiences,and then decided the reform way of RMB exchange rate regime at the lower cost.From 1949 to 1952,which was the youth of PRC,the newborn PRC had been facing the difficulties of existance. The internal mission of China at that time was to revive and develop national eeconomy,and the external mission was to breakthrough blockade of imperilism.So the exchange rate policy just became an outcome coordinating exchange policy and foreign trade policy which incent export and control import,and China choose to carry out independent and flexible exchange rate regime.From 1953 to 1972,when planning economy system of China had been established completely, Chinese leaders of that time decided to stabilize exchange rate to facilitate budget consolidation and the margin of exports and imports could be advanced by finance,which could match up with planning economy system.After collapse of Bretton woods System in march 1973,flexible exchange rate regime was very popular among western countries.Considering frequent changes of exchange rate of foreign currencies,failing to adjust exchange rate of RMB according to official exchange rate of foreign currencies and realizing the role of exchange rate in foreign trade, Chinese government choose to implement exchange rate regime pegging a basket of currencies.From 1981 to 1993,double-track exchange rate regime reflected incrementality of Chinese economy reform,showed the progress of Chinese leaders on understanding of market exchange rate and indicated gaming relationship between central government and local government and gaming relationship between government and enterprises.At that time,international community was tolerant to double-track exchange rate regime and didn't criticize it.There are two reasons,one is that Chinese economy has not become powerful enough to influence the world economy greatly,the other is that facing economy competitor such as Japan and hegemony contender such as Soviet Union,USA decided to let China integrate into the world and showed the tolerant attitude to double-track exchange rate regime.At the same time,IMF was experiencing the weakest situation and it had no power to supervise exchange arrangement of countries.From 1994 to 2005,when China carried out managed flexible exchange rate regime, China accepted the eighth article of IMF and realized RMB convertibility in current account.But in the exchange settlement and sales system, RMB exchange rate appreciated gradually and slowly and PBC's trace of exchange rate manipulation was very obvious.During the financial crisis of Asia,China insisted RMB shouldn't depreciate at the sacrifice of its own interest.After the crisis,Chinese exchange rate regime became pegging exchange rate regime in fact and it had strong system inertia.The estimation criteria of international community itself is opportunistic,so RMB pegging exchange rate regime is suffering from critiques today although it has ever been praised by the international community during financial crisis of Asia. Therefore,when international community demands RMB exchange rate should be more flexible,we should make our own judgement on the basis of maximizing the nation's interest and considering external condition and not care others'comments.In sum,the political relationship between China and western developed countries has experienced the process of hostility,contact and integration,and RMB exchange rate regime has also experienced the repeated process of being in step with or seperating from western mainstream exchange rate regime.As Chinese economy system , RMB exchange rate regime has also experienced marketing,planning and marketing process.During the process,we not only find out RMB exchange rate regime has characteristics of double track and deep branding of politics,but also realize the system characteristics of developing countries persuing economy development.Through the evolvement of RMB exchange rate regime,we are able to know it has strong system dependence,even if there is a radical reform,it cant't build up the stable exchange rate regime immediately.Because there are unshakable interest relations behind the RMB exchange rate,which belongs to political consideration including domestic and international factors.There are too much political interest banding with RMB exchange rate regime,so its development falls behind the whole economy system,and flexibility adjustment of RMB exchange rate regime under the external pressure will need more flexible politics and economy system and decisions.Therefore, reform of RMB exchange rate regime needs more arduous efforts and more stable policies.