The Study Of RMB Appreciation Anticipation And Exchange-Rate System Choice

During the beginning of 1994 to 21~st july,2005,china has adopted onefold, market supply and demand based, managed floating exchange rate system. In this period, the RMB exchange rate has experienced both depreciation pressure in Asia financial crisis of 1997 and appreciation pressure since 2002. Except for a little appreciation few years later the reform of 1994, the rate is always in an excessively stable situation ,basically keeping 8.28yuan/dollar .Since the reform of RMB exchange rate system on 21~st july,2005, the trend of RMB exchange rate is also in stabilization ,but ,as a matter of fact, appreciation pressure is still in existence.Most people home and abroad (especially abroad ) deem the reasons of RMB appreciation as the surplus of balance of payment and rapid growth of international reserves. Some even use purchase power parity (PPP) to argue that RMB should be appreciate excessively. The paper think: using PPP to explain whether RMB should be appreciate or not is abrupt. Because the most important factor is the improper system design of shanghai foreign exchange trading center ,including strict requirement of foreign exchange designated commercial banks' qualification, foreign exchange designated commercial banks's holding scale, dollar/RMB fluctuation extent limit and central bank's excessive intervention. However, we should realize that the costs of keeping current exchange rate formation mechanism in performance are becoming bigger and bigger. In china, adopting independent monetary policies is necessary when globalization of economy and finance is continuous reinforcing and capital flow must be in high frequency .Therefore, RMB's fluctuation must be necessary and reform of RMB exchange rate formation mechanism is urgent. but the reform should perform step by step.The paper draws conclusions: the reform of RMB exchange rate should insist on "go-aheadism", "controllable" and " moderation " principles in first ,then turn to managed floating exchange rate system .we now have possessed enough conditions and opportunity to turn to managed floating exchange rate system .In practice, perfecting financial market should fist ;unloosening limit of foreign exchange supply an demand step by step ;pushing capital account free exchange course; mainly focusing on optimization system design of shanghai foreign exchange trading center an RMB internationalization.