The Reform Of RMB Exchange Rate Regime After The Financial Crisis

As a link of economies, a reasonable exchange rate plays an important role in the development of the economies and the smooth running of the world economy. With the progress of reform and opening up, we unified the swap and official exchange rates in the January 1,1994. The new exchange rate is 1 U.S. dollar 8.7 RMB. Faced with international pressure for RMB appreciation and the actual situation of economic development, we implemented a market-based, with reference to a basket of currencies, a managed floating exchange rate regime in the July 21,2005. In 2008, under the impact of the global financial crisis, our country insists on not devaluing the RMB against the dollar, which has made important contributions to the regional and world economic recovery. With the gradual recovery of world economy, the PBC issued a speech that is "further advance the reform of RMB exchange rate formation mechanism; strengthen the RMB exchange rate flexibility". Since then, the reform of RMB exchange rate regime began a new era.This paper mainly discuss the following four questions:①the feasibility of a variety of exchange rate regime choice theory applied to our country, especially the new exchange rate regime choice theory after the Asian financial crisis.②Lessons learned from the Asian financial crisis and enlightenment to China’s exchange rate system reform;③challenges facing our country under the current exchange rate system;④the reform path to RMB exchange rate regime.To solve the above problem, this paper summarizes the categories of exchange rate regime, combined with exchange rate regime choice theory and the Asian financial crisis, analyses the main challenges facing our country under the current exchange rate system, researches the direction of reforming RMB exchange rate regime after the global financial crisis.This paper is divided into five chapters: The first chapter is the introduction. This article introduces the research background and significance, status, content and methods.The second chapter describes the international classification of exchange rate regime and the reform history of RMB exchange rate regime after 1994. Prior to 1998, IMF’s classification was based on the exchange rate regime submitted by States. Because this classification was questioned by many economists, IMF began the de facto classification in accordance with countries’ actual situation after 1998. In our country, since the unification of exchange rates in 1994, RMB exchange rate regime has gone from a single pegged to the dollar to a managed floating exchange rate regime with reference to a basket of currencies. However, the actual exchange rate changes of the RMB、the U.S. dollar and the Japanese yen show that RMB exchange rate regime in general tend to be fixed and no real sense of a managed floating.The third chapter starts with analyzing the relevant factors of choosing an exchange rate regime. Include:economic fundamentals, shocks, financial structure and political ideology. Then, summarize the main theory of choosing an exchange rate regime. Include:the fixed exchange rate regime and the floating exchange rate regime、"fear of floating"、the Bipolar View、the original sin view、the intermediate exchange rate regime——crawling bands、monitor bands、BBC rules. Finally, discussion should choose which type of RMB exchange rate regime. Because we neither meet the standards of fixed exchange rate regime nor meet the conditions of floating exchange rate regime, the intermediate exchange rate regime may be our best choice.The fourth chapter starts with reviewing the Asian financial crisis. Next, compares macroeconomic conditions between Asian5 in 1990s and the current China. Include:economic growth (GDP)、capital flows、dependence on trade (imports and exports -GDP ratio)、inflation rate (CPI)、current account balance-GDP ratio. Then, summers up the lessons learned from the Asian financial crisis. It is precisely in circumstances like those in crises that flexible exchange rate regimes should be expected to perform better. However, a reasoned judgment on the desirable exchange rate regime thus needs to be based not only on how it performs in a crisis, but how it performs on average over time. Finally, summarize enlightenment of the Asian financial crisis to our country. The fifth chapter starts with analyzing the main challenges facing our country under the current exchange rate regime. Include:independence of monetary policy, balancing economic growth, development of banking system, global imbalances and trade protectionism. Then, also point out that exchange rate regime reform can follow the path:improving the existing exchange rate regime with reference to a basket of currencies�'to "BBC rules"�'the ultimate transition to a freely floating exchange rate regime. Finally, recommend a number of supporting measures.