| With the deepening of its opening-up, China's external oriented economy has made significant advancement with the external demand becoming an important driving force in economic growth. However, in the course of development, the high dependency of external market and discrepant development of domestic and external demand has become a big risk to the economic sustainable development. The outbreak of Asian financial crisis in 1997 witnessed the defects of China's high dependency to external demand. In 1998, China initiated the strategy of expanding domestic demand to counter the crisis and set up associated policies and measures. In the real results, though important in handling the crisis, these measures did not reverse the falling domestic consumption rate and China's economic growth is still highly dependent on investment and external demand. Meanwhile, the problems of over capacity, increasing trade disputes and extensive growth model emerged and worsened. In 2008, China's economy was hit hard again by the abrupt shrinking of external demand caused by the international financial crisis, which originated from the sub prime crisis in the U.S. As the biggest developing country, China faces a heavy task of development. Obviously under such circumstances, it is an important issue the theoretical circle should pay attention to as how China's economic growth can be sustained and based on domestic demand and how various factors can be integrated to solve the development problem so that external demand can be put into full play and risks caused by world economic disturbance can be effectively cushioned as well, all of which are theoretically and practically important.To examine and solve the above problems, the article takes China's domestic demand expansion as the core, adheres to the Marxism materialist dialectics and adopts the analytical method, historical and logic, formal and empirical. The article initiated and emphasizes the research in the prospect of exchange rate mechanism arrangement. The article is divided into five chapters. The first chapter deals with the integrated assessment of documents on expanding domestic demand, mainly introduces and reviews the study results on the subjects by researchers home and abroad. The second chapter draws from China's economic development practices, examines and assesses pros and cons of external oriented economic development, analyzes the historic background of China's shifting from mainly export oriented economic development strategy to the economic development strategy based on expanding domestic demand. While analyzing China's external oriented growth strategy evolution in a historic way, the second chapter proves by truth the subjective inevitability of China's requirement of dependency on domestic demand. The third chapter, as the core content, gives a thorough thought on the interaction between domestic demand, external demand and exchange rate, puts forward the guiding principle of handling domestic and external demand. The chapter especially focuses on the impact of exchange rate on expanding domestic demand and utilizing external demand, pointing out that a steady currency environment must be put into place to actively and effectively expand domestic demand and utilize external demand. After examining the exchange rate choice theory and the evolution of China's exchange rate system, the chapter proposes a preliminary frame theory of exchange rate system pegged to a basket of products, which would be an exchange rate system arrangement suitable for China's domestic demand expansion. The fourth chapter mainly examines the effectiveness of China's fiscal and money policies in the practices of expanding domestic demand, and draws useful insights based on evaluation and consideration of China's expanding domestic demand policies in recent years. The fifth chapter reviews and makes references to the typical practices of expanding domestic demand in the United States, Japan and Thailand, proposes comprehensive policy suggestions on China's expanding domestic demand after examination of practical problems facing domestic demand expansion in the current situation.The article, when put into an overall context, is innovative in the following three ways. Firstly, the article reviews the significant historic events in China's reform and opening-up in a systematic way and grapes the outstanding features of reform and opening-up. Dividing the course of reform and opening-up into three stages of starting from successful points, spreading in depth and overall opening-up, the article sorts and reviews the course of China's foreign economic and trade strategy evolution, combined with the history of opening to the outside world for the first time. Though only a documentation project, the article innovatively depicts the course of China's external oriented growth strategy from the angle of opening evolution, hopefully providing insights for follow-up study. Secondly, freed from the analytical method of speaking of domestic demand in terms of domestic demand, the article starts from the interrelationship between domestic demand, external demand and exchange rate, underlines the importance of handling interrelationship between domestic and external demand and realizing inter promotion of the two. Meanwhile, the article analyzes the impact of exchange rate on expanding domestic demand and utilizing external demand from the exchange rate policy point of view, proposing that a steady currency environment must be put into place to actively and effectively expand domestic demand and utilize external demand. Based on the study, a preliminary concept of exchange rate system pegged to a basket of products is proposed. The article initiated in current studies that the arrangement of exchange rate system should be taken into consideration in the research of expanding domestic demand.Thirdly, the article is innovative in its policy thinking of expanding domestic demand. Policies and measures of expanding domestic demand should not be made to counter the cyclical economic downturn for the time being. The article draws lessens from policy practices home and abroad, starts from inter promotion of domestic and external demand and creating steady currency environment, and proposes relevant policy suggestions. The article innovatively puts exchange rate policy and utilizing external demand policy into the comprehensive policy arrangement in expanding domestic demand, abandoning the limitations of merely valuing fiscal, credit and exchange rate policies in the previous researches, hopefully to be active and useful in creating the comprehensive policy arrangement in expanding domestic demand. |
