Study On The Formation Mechanism Of RMB Exchange Rate

In July21,2005, the people’s Bank of China(PBC) announced that China began to implement "based on market supply and demand, reference to a basket of currencies, the managed floating exchange rate system". This is the establishment and improvement of China’s socialist market economic system, giving full play to the important measures basic role of the market in resource allocation. Since the exchange rate reform, more than7years till now, the people’s Bank of China in accordance with the initiative, controllability and gradual principle, has been constantly improving the managed floating exchange rate system. The new exchange rate system runs smoothly, the flexibility of the RMB exchange rate increased a lot. However, in the background of increasingly appreciated renminbi, we can see, China’s inflation rate is generally at a high level in recent years. And this is a reflection of the currency depreciation. This makes the people’s Bank of China in the policy aspect had to face a dilemma, and also comes the challenge of how we theoretically understand and solve the "internal depreciation and external appreciation" phenomenon.In this paper, combined with recent economic data, through logical analysis and empirical analysis, the forming mechanism of the contradiction of renminbi "internal devaluation and external rise" is studied. This paper pointed out that giving the current transition period during which the RMB exchange rate formation mechanism has not yet completed, it is due to the need of our country still need a stable exchange rate that the appreciation pressure is not immediately reflected in the exchange rate adjustment in the same direction immediately, but the huge liquidity into the economy through the channel of the central bank to. This brought great difficulties to the development of China’s monetary policy, and seriously affecting the independence of China’s monetary policy.Ther, based on the correct understanding of the problem, combined with the opening of the capital account and other closely related economic reforms, according to short-term, medium-term, long-term levels, This paper is designed to solve this problem in a series of targeted countermeasures.