On The Choice Of RMB Exchange Rate System Problems

After the reformation on July 21 2005, Renminbi exchange rateregime became a hot topic again. This paper introduces a brief history ofRMB's exchange rate regime and analyzes the reformation on exchangerate level and regime in 2005. From that we can see that the direction ofreformation is toward more flexible. Then according to the trilemma ofMundell-Fleming model we conclude that RMB's exchange rate regimewould be under the system of managed floating within a relative longperiod. In this period, Chinese banking system and financial market mustbe improved and the capital account would be liberated gradually. In theend of the period China could consider to abandon the basket and turn totarget zone. Only when the conditions above were improved,RMB'exchange rate can float freely.