Studies On China’s Foreign Exchange Intervention

China turned to Managed-Floating Regime since2005. With the surplus of China’s Balance of Payments soaring year by year, the People’s Bank of China implemented a large scale of foreign exchange intervention, which leads mass RMB issuing. At the same time the independency of China’s monetary policy was greatly eroded.In order to explore the verity of problems of China’s foreign exchange intervention and find a perfect solution to these problems, many factors of China’s intervention system are analyzed and compared with other countries in this paper, including the objective of intervention, the agency who make intervention, the manners and instruments used to intervene, and so on.Then many defects of our country’s intervention system are found. Firstly, the central bank acting as the only agency of intervention is causing many troubles. Secondly, there are lots of shortcomings existing in the manner of intervention and writing off currency. Thirdly, the intervention policy inevitably conflicts with the monetary policy. Fourthly, the cost of China’s foreign exchange intervention is high. Fifthly, the intervention action has negative influence on macroeconomic factor such as CPI and interest rate.To solve these matters once and for all, the idea of Public Foreign Exchange Fund is proposed in the last chapter. Public Foreign Exchange Fund, which is designed to intervene and manage the foreign exchange market, should be launched and controlled by Treasury Department.It consists of Foreign Exchange Intervention Fund and Foreign Exchange Investment Fund. Besides, the principle of this Public Foreign Exchange Fund, and its operating regulation is discussed in detail.