Selection Of Chinese Exchange Rate Regimes In Economic Transition

It's urgent that international capital transfer among different countries under the trend of financial free dom. There are some complex relationships between international capital transferring and the rates arrangements of different countries. This paper introduces the evolution of the theories on selection of foreign exchange rate regimes after the Bretton Woods System. We analyzes the two corner solution (completely fixed or completely floating rate )and any intermediate regime, then we conclude that it is impossible to establish a complete market based foreign exchange regime.This paper arguments the exchange rate mechanism in China has been "a floating exchange rate under supervision" in name but a fixed exchange rate connected with US dollar in practice, Since 1994, which is the problematic both in present situation and in the milieu of financial market's further opening-up, So, a new option has to be made for RMB exchange rate mechanism. Keeping the "tri-element paradox" among independent monetary policy, fixed exchange rate and capital flux in mind, it is essential to choose an exchange rate mechanism suitable to China. then arouses the question of the regime's reorientation for the choice of floating exchange rate, so that the advantage that exist theoretically under floating exchange rate regime have few effects in practice. Therefore, the logical conclusion is that the reorientation of exchange rate regime should be that between fixed exchange rate and floating exchange rate. It is suggested that "objective exchange rate mechanism" be the optimal one for China at present. In future china should establish a complete market based foreign exchange regime according to the development of economy and RMB may be one of area currencies or international currencies, the internationalization of RMB will be realize.