Research On RMB Convertibility And Countermeasure For Financial Development Of China

AbstracttSince the Southeast-Asia Financial Crisis in 1997, the foreigntrade of China has maintained a favorable balance, caPital accountmaintained net infloW foreign exchange reserve been increasing steadilyand international revenue and expenditure kept sound. The value ofM has been stable home and abroad, which contributes greatly to thestabilization of national economy Wth the strengthening of financialliberalization and caPital intemationalization, RMB has been used moreand more in intemational currency market, which makes opening RMBcaPital account necessary after China has realized her conve1tibility ofM current account. Particularly, as joining WTO approaches, Chinahas to realize her financial openness step by step within the stipulatedperiod if she wants to be a member country of WTO. Capital control willonly lead to the losses of some benefits, which WTO might bring us.After the basic convertibility of RMB current account inDecember of l996, some suggestions and envisagement on this questionhave been put forward theoretically, among which are that the unboundintemational caPital flow doesn't suit every country andmarket-burgeoning countries had better not open caPital market tooearlier; and that the domestic economy steadies, inflation rate decreases,foreign exchange reserve is sufficient and people's eXPectation fOr RMBis quite high, so it is a good time to realize the convertibility of RMBcapital account. All of these viewpoints are reasonable to some extent;while, the theoretical research and inquiry into the currencyconvertibility are sporadic and unsystematic. Thus, on the basis of thepractice in China and from the point of view of the internationalizationof capital floW the author points out the historical necessity of RMBconvertibility as well as feasibility necessary macro-µ-conditions,?existing difficulties and counter measurements in this article; and with which as a theoretical basis, the author further analysizes the favorable and unfavorable effects of RMB (especially capital account) convertibility on the reforms of exchange rate system and interest ratesystem along with the development of banking industry and security industry. And at last, the author makes many sound advices for the marketability of exchange rate and interest rate and for how the banking industry and security industry grasp chances and face challenges.The author hopes that this article will provide China抯 financial industry抯 striding along a healthy road with some useful theoretical references after the realization of RMB convertibility.