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Research On The Appreciation Of RMB' Exchange Rate

Posted on:2005-09-23Degree:MasterType:Thesis
Country:ChinaCandidate:L J HeFull Text:PDF
GTID:2156360125956781Subject:Finance
Abstract/Summary:PDF Full Text Request
On the background of continual devaluation of US dollars since the year of 2003, the actual adoption of RMB appreciation of "Pegging US Dollar" exchange rate policy by the Chinese currency authorities arises abruptly as a hot issue among the international financial field. Appeals from some governments and private sectors has been made for the Chinese Government that the RMB should be appreciated or the management and intervention of the RMB' exchange rate should be removed. At the same time, some scholars in China also bring about their arguments on the issue, based on their own knowledge about it. This paper applies the western exchange rate determination theory to conduct an empirical study and a normative analysis on the RMB' exchange rate, and then endeavors to pose our own viewpoints on the issue.Chapter 1 recalls the evolution process of the RMB' exchange rate system and summarizes the characteristics of present exchange rate system. The paper points out that the purpose of the RMB' exchange rate reform in 1994 was to adopt a policy of "unique and managed floating exchange rate, based on the market supply and demand". Furthermore, the first chapter lists out the views of main experts, scholars, and related authorities at home and abroad on the RMB' exchange rate, trying to sketch an overall picture on the issue.Chapter 2 presents the classical western exchange rate determination theory--thePurchasing Power Parity and Interest Rate Parity theory. The first section focuses on the Purchasing Power Parity (PPP) theory, explaining the absolute PPP, relative PPP and transaction-cost-concerned PPP theory respectively. In this section, the author applies the relative PPP theory to examine the RMB' exchange rate and concludes that that theory has a bad interpretation of the specific RMB' exchange rate. The second section focuses on the Interest Rate Parity theory. After explaining the covered and uncovered Interest Rate Parity theory, the author uses them to examine the RMB' exchange rate again, and come to a conclusion as the same as the previous PPP theory.In chapter 3, the first section examines the factor influencing the fluctuation of the RMB 's exchange rate, including that of economy, government intervention, market expectation and politics, etc. and points out that the determination of the RMB' exchangerate results from the multi-factors. The following section explores into the actual situation of each of the factors pushing the RMB' appreciation, and concludes that the exchange rate of the RMB bears the pressure of going up.Chapter 4 examines the benefits and harms of the appreciation of the RMB. The first section discusses the positive influences of the appreciation, i.e. promoting the balance of payments and the condition of repaying the international debts and so on. The second section examines the negative influences of the appreciation, including undermining Chinese exports and aggravating the deflation condition and so on. Through the above analysis, the author concludes that the negative side of the appreciation overweighs the positive side.Based on the previous discussion, chapter 5 presents some suggestions that can ease the pressure of the RMB appreciation, including the control of the growth rate of the foreign exchange reserve, the reform of foreign exchange selling system and further opening the service market to foreign investors, etc.
Keywords/Search Tags:the RMB, the Exchange Rate, the Purchasing Power Parity, the Interest Rate Parity, the Appreciation
PDF Full Text Request
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