The Study Of Internal And External Balance Under The Condition Of Internationalization Of RMB

One country will face internal and external balance targets in the open economy.The targets which reflect the inner state of the economy such as economy growth, full employment, the stability of commodity price etc. belong to the internal balance targets and the targets which reflect the exterior state of the economy such as the balance of payments, the stability of exchange rate etc. belong to the external balance targets .As the main targets of the open economy,internal and external balance targets will influence each other.When a country takes a certain measure to realize a certain target, it will probably disturb or destroy another target,so that will result in the conflict between internal and external balance targets.That conflict will be strengthened as the enhance of the economic openness. Along with the growth of the Chinese economy and the rising prestige of RMB , some economists forecast that RMB will become a new currency of the world after US$, Yen and Euro$. The internationalization of RMB have also been brought into agenda. The internationalization of RMB means that the openness of Chinese economy will be further enhanced. Under that condition, there are some uncertainties about the realization of internal and external balance targets.On the base of floating exchange rates,openness of the capital account and marketability of the interest rates, we firstly explore the economic character under the condition of the internationalization of RMB in this article, and measure the economic openness under that condition .Second, we analyze internal and external balance targets under the condition of the internationalization of RMB.In the third part, we analyze the conflict between internal and external balance targets which China may face on three stages. With the analysis of the policy tools, we conclude that in the fourth part:In order to attain the internal and external balance targets under the condition of the internationalization of RMB, fiscal policy should be designated to economy growth;one country should take monetary policy to maintain the stability of commodity price;internal expenditure policy,exchange policy and interest rates policy should be designated to the target of the balance of payments; one country should keep the exchange rate stable by the way of reaching the BOP target; among the all targets, exchange rate must be the first.