A Study Of Reasons Behind The Argument Of The Exchange Rate Of RMB

The exchange rate of US dollar to Euro and other currencies of the major industrial countries keep going down recently. Because RMB is commonly believed linked directly with US dollar, it once again attracts people's eyes. Many economists and decision-makers of some governments appeal that RMB to be revalued.This article focuses on the political reasons behind the argument about the exchange rate of RMB. First we will review the development of the exchange rate of RMB and the non-deflation policy employed by Chinese government during Asian finance crisis. Then we will move to the political reason why US and Japan advocate RMB revalued. It is because of the coming presidency election and to release the pressure imposed by the manufacturing industry and the labor union that the exchange rate of RMB becomes a political issue in US. As for Japan, it aims to maintain the influence of Yen in Asia and to keep China from enhancing its competitiveness of the fundamental industries. The article points out that the revaluation of RMB would be helpless to solve the economic problem of US and Japan. The article also analyzes some key factors which influence the exchange rate of RMB based on the current situation of Chinese economy by sampling the relevant data from January 2001 to December 2003. The calculation shows that the nominal exchange rate of RMB keeps going under a revaluation pressure. The author believes that it is sensible for China to learn from the experience of the Plaza Treaty as well as its leading result and keep the exchange rate of RMB stable. The most important thing is to focus on the development of our domestic economy.