On Exchange Rate System Reform Of RMB

Since Easter Asia financial crisis erupted and RMB kept stabilizing notdepreciated in 1997, RMB exchange rate system turned floating under supervision intode facto dollar peg. For depreciation of USD brought great increase on amount ofChinese export, RMB de facto dollar peg system face unprecedented pressure. Sincethe second half of 2002, some developed countries, like America, Japan and EU, pressthe government of China to revalue the exchange rate of RMB, and to reform currentexchange rate system. Exchange rate system choice become a hotspot economists payattention to. In fact, exterior pressure is only one side. Reform and open-up oneconomy and establishment of socialistic market economy is the other side of reasonfor RMB exchange rate system reform. Whether RMB exchange rate system reformsuccessfully progresses or not matters to equilibrium to opening economy inside andoutside, matters to opening of capital account, and matters to regionalization andinternationalization of RMB. RMB exchange rate system reform is really key step inprocess of establishment of Chinese market economy regime. The paper selects RMB exchange rate system as subject to start with practice andtheories of international exchange rate system reform. It also analyzes current RMBexchange rate system on transform, existing base and challenge up against, and putsforward interrelated countermeasures for RMB exchange rate system reform. The paper has four parts. In the first part, the course in four phases ofinternational exchange rate system reform is reviewed and institutional factors forexchange rate determination is analyzed. The second part analyzes the establishmentof current RMB exchange rate system, and explains the base of current RMBexchange rate system reflected on exterior surroundings and interior mechanism. Inthe third part, the challenges up against current RMB exchange rate system come fromweakening exterior base, interior antimony, opening capital account and latent crisis inpegged exchange rate system. The forth part summarizes the theories about RMBexchange rate system reform in brief, uses international lessons for reference, andanalyzes opportunity and means of RMB exchange rate system reform. RMB exchange rate system reform should consider the conceivable changes toChinese economy entering into world economy. On account of characters of openingeconomy, RMB exchange rate system reform should be related to economic structurechange, harmonized with the increasing extent of capital flow, and accommodated totrend of diversification of international reserve currency and internationalization ofRMB.