The Choice Of Exchange Rate Regime And The Practical Choice Of China

As important macroeconomic variables, the exchange rate system changes a country, with wide-ranging implications. Over the past 10 years, with the impact on the international capital flowing highly and international financial crises outbreaking frequently, the problem of exchange rate regime choice of China is on the core issues in dispute particularly after the major reform of the exchange rate system in July last year . Since 1994, China adopted the managed floating exchange rate system nominally, but we feared that the relax foreign exchange controls will cause the exchange rate risks leading to the financial crisis. So RMB focused on the dollar actually. And the exchange rate regime of China also is classified as focusing exchange rate system by IMF. Focusing exchange rate regime created a stable external environment for the development of enterprises in our country and provided protection for the foreign investment. But along with the changes of the economic strength and environment, this exchange rate system conflicted with the ultimate objective of the economic reform of China. People's Bank of China announced that the RMB exchange rate system"separated"with the dollar and let the dollar exchange rate increase by small extent on July 21, 2005.This major change triggered many comments of the researchers all of the world. And had a far-reaching sense on the research about the choice of exchange rate regimes future trails.