The Impact Of Capital Account Liberalization On China's Exchange Rate Formation Mechanism

Capital account opening and exchange rate forming mechanism are the two most important policies. The complexity of one country's exchange rate forming mechanism depends on it's exchange rate policy and opening degree of economy. China has opened current account. How we reform the exchange rate mechanism when we are opening capital account regularly? How the exchange rate forming mechanism change? And is this change will effect the exchange rate policy? This article will analyze these questions.Exchange rate forming mechanism is the process of foreign currency supply and demand, combining with other factors. It reflects the meaning of exchange rate policy and shows the changes. When the foreign currency management changed, the exchange rate will change, and the meaning of the policy will change too.This article studied documentary about capital account opening and exchange rate policy selection, and then started from the relationship between capital account opening and exchange rate forming mechanism. Then find out the key point of this relationship, which is the mechanism of foreign currency management. After that this article analyze the reformation of foreign currency management, and studied China's capital account opening status. At last find out the main factors effect exchange rate forming mechanism. Above are the first and second parts.The third and fourth chapters are the core of this article. Exchange rate policy shows the changes of exchange rate, so in the third chapter author studied how the capital account effect exchange rate. In the fourth chapter, the influence of capital account opening is analyzed. And then the arrangement of China's capital account is showed.At the end of this article, the experience of international capital account opening and exchange rate forming mechanism has been studied. Then the author predicted the future of China's capital account and drew the conclusion that manageable floating exchange rate policy is the favorable choice now. In future the clean floating exchange rate mechanism is the final trend.