Write Off The Foreign Exchange Control Under The Conditions Of China's Foreign Exchange Market Intervention

ABSTRACTAfter the foreign exchange system reform in 1994, our country have implemented a unitary managed floating rate system on the basis of market demand and supply, and abolished the system of foreign exchange retention and turned over to the state , set up bank settlement and surrender of foreign exchange system . The reform have played an important role in the increase of our state foreign exchange reserve and sustaining a stable Renminbi exchange rate . But since the reform , The People's Bank of China had to act as a sustainer of the inter梑ank foreign exchange market equilibrium :to intervene the Renminbi exchange rate whether willing or not . Thus the intervention made a great effect on the monetary policy to our country , especially to the volume and structure of money supply Instead of flowing out through treasury overdraft and re-loan ,money base began to flow out through the increase of foreign exchange reserve .This represent one side of The People's Bank of China .Therefore reconsidering the intervention measures of foreign exchange market , seeking for some effective sterilized intervention measures to cut off the harmful effects on the monetary policy from the intervention is of significant meaning to our country.My thesis consists of three parts . After introduce the basic concept of sterilized intervention and non-sterilized intervention , in chapter one , I put an emphasis on the analysis of the necessity of intervention of foreign exchange market , then go to some developing countries which had implement many sterilized measures to be cope with the large scale of capital inflow ,in order to expound how the sterilized policy contribute to the coordination of exchange rate policy and monetary policy .At last ,from our country's existing situation , the thesis discussed the great meaning of sterilized intervention .With the use of some exchange rate deciding model , chapter two mainly discussed the effect of sterilized intervention .Finally, I summarized it's three effects , they're policy effect , market effect and signal effect . With the analysis of the preceding chapters , in accordance with the existing situation of China , chapter three made some suggestions to strengthen the sterilized intervention measures ,such as how to regulate the reform of the inter梑ank bond market ;to coordinate the open-market operation of the People's Bank of China ;explore some new dealing varieties in the foreign exchange market ;to enrich intervention measures of the People's Bank of China :to establish foreign exchange stabilization fund in order to make effect to foreign exchange market.