A Discusstion On Currency Substitution In China

Currency substitution is the characteristic trouble in the open economy. Under the open economy and convertible currency circumstances, when the internal public lose faith in the shaky national currency value or the income rate of native currency turns to be relatively low, the currency substitution would probably be produced. First of all, this paper approaches its concrete connotation and classification; and appraises the western typical currency substitution theories at present; then analyzes its formation mechanism and its influence on the economy. On the basis of analysis ahead, the author analyzes Chinese currency substitution and puts forward the policies and proposals against currency substitution, that is, our nation should keep the RMB value stable; when reform the foreign exchanges system, we should put into effect the policy of necessary foreign exchanges control; appropriately heighten the practical income rate of native currency and strengthen the public's confidence of native currency.