On The Choice Of Rmb Exchange Rate System

This paper reviews the theory of foreign exchange regime selection, then analyzes the current arrangement of Chinese foreign exchange regime and its limitations. It points out that the foreign exchange regime of china actually pegs to USD. Though it makes achievement in promoting foreign trade and absorbing foreign direct investment, it can't adapt to the macro economy situation now. Also because the capital account is opening to outside fast, it is urgent for China to adjust the RMB foreign exchange regime. This paper points out that we should first peg to a basket of currencies, then turn to Target-Zone foreign exchange regime, when the capital account almost opens and Chinese economy is powerful enough, then turn to floating rate regime.