Research On Market Mechanism Of The RMB Exchange Rate

As the degree of openness of the Chinese economy and the deepening of world economic dependence, China has become the world’s second largest economy. The integration of China’s economy with the world continues to deepen, and the exchange rate market has gradually become the developing direction of China’s exchange rate system reform and inevitable trend. How to apply exchange rate market-oriented to stable economic development and, at the same time, avoid financial crisis has become a serious matter subject. Exchange rates as ameasurement of macroeconomic indicators together with interestrate exams acountry’s internal economic and external coordination in economic development, which is an important reference.The purpose of this paper is to analyze the process and the current status of China’s exchange rate market-oriented and to make reasonable market-oriented recommendations. On the basis of summary of the exchange rate market-oriented theories, this paper analyzes the evolution of the exchange rate system since the founding of our country and our current exchange rate arrangement, and uses empirical testing methods to investigate the linkage of China’s exchange rate and interest rate as well as the linkage of exchange rate and exports, and analyzes the causes of the results. Also, this paper makes comparative analysis of the lessons occurred in the financial crisis of Thailand and Mexico, and followed by is a detailed analysis of the pros and cons of the exchange rate market-oriented in China. Furthermore, combining with the theory of financial liberalization, the Marxist theory of the financial crisis and the Impossible Trinity, accordingly this paper suggests some recommendations about China’s exchange rate market-oriented.The conclusions in this paper is that China’s exchange rate market is not enough since the founding of New China and there is linkage between the exchange rate and interest rate, there is no Granger causality relationship between the exchange rate and exports, and the exchange rate market is an inevitable trend needed to be solved urgently. However, a smooth way is welcomed not radical way.