Discussion On RMB Exchange Rate Regime Transitions

Because China's exchange rate pegged to U.S. dollar, and with a large number of surplus in balance of payment in recent years, the western countries'pressure on the appreciation of RMB since 2003, and the surge of the foreign exchange reserve, challenge the existing exchange rate regime of Chinese RMB. It is urgent to make some adjustment to the exchange rate regime of Chinese RMB. RMB exchange rate regime evolution had happened in 2005, RMB appreciated 2%, and China implement manageable floating exchange rate regime.The new exchange rate regime has actualized for one and a half years. So it is very important to analysis RMB exchange rate regime transition.As an emerging country, China is incorporating into the international capital market day by day, but its financial degree of opening is lower than other emerging countries.This thesis is written according to the following logic: first of all, through understanding exchange rate regime in the whole world and existing exchange rate regime theories, drawing the general conclusion on the track and time of successful exchange rate regime transition; secondly, combining the theories on exchange rate regime with characteristics of emerging countries and analyzing the experience and lessons on the choice of regime; finally, from the conclusions of success exchange rate regime transition of emerging countries, proving the time of RMB exchange rate regime transition is happened in a fit economic environment. Further more, we also could forecast in which conditions RMB exchange rate regime swift to free floating exchange rate regime.The thesis consists of five chapters altogether:Chapter I introduce the basic theory of exchange rate regime transition. First, explain Mundell-Fleming model, which is about the choice of exchange rate regime, and"impossible triangle"theory. Exchange rate regime means a series of regulations and acts to define value and the change modes of exchange rate. Secondly, introduce the latest theory about exchange rate regime choose theory detailed, such as the fear of floating, hollowing out theory of exchange rate regimes, exit strategies. Thirdly, present the theory about exchange rate regime transition. Finally, reviews the productions about the time of exchange rate regime transition. These productions are researched by many economics, which come from China and other counties. Their researches enlightened me, and give me much inspiration.Chapter II studies the characteristics of emerging countries and the time of exchange rate regime transition of emerging countries, and draws some conclusions through case study on specific countries. First, defines the meaning of the emerging country. According to the definition of IMF, the emerging countries referred to the countries whose financial market is immature but already open to foreign investors. Secondly, carries on case study of the evolution of exchange rate regime in Taiwan, Poland, Chile, and Thailand. Finally, analyzes the characteristics of the successful transition time of exchange rate regime in emerging countries: the economy of the country is all right, the rate of GDP increase so fast; the real exchange rate of the money is in the course of appreciation; the country has enough foreign exchange repertory, to protect the country from speculate strike; strengthen the control of capital that flow speculate in a short time.Chapter III according to the conclusions above analyzes the transition of RMB exchange rate regime. First, the economic numbers of China in resent years reveals that the economy of China circulated nicer, and this trend will continue. Secondly, introduce a model, which can forecast the persistent appreciation time of RMB exchange rate. Through this model, we can conclude that RMB will appreciate in a long time. Thirdly, a large number of foreign exchange reserve is very important. If a country has enough foreign exchange reserve, the country will have the ability to stabilize its exchange rate, and could help the country accomplish the exchange rate regime transition successfully. Finally, to accomplish the exchange rate regime transition successfully, the country also should strengthen the control of speculate capital.Chapter IV also according to the conclusions above, we could predict the next transition of RMB exchange rate regime. In which conditions RMB exchange rate regime could switch to free floating exchange rate regime. Chapter V through the analysis above, we summarize the whole thesis, and achieve two conclusions.Finally, according to the experience of successful exchange rate regime transition of emerging countries, we can draw the conclusion that China's exchange rate regime transition is timely and in reason. What is more important is that, exchange rate regime transition is not a static problem, it's a dynamic process. Exchange rate regime transition is not get something done once and for ever. There is none exchange rate regime suit all countries in a period or a country in all periods. So research on exchange rate regime transition is very significative.