Exploration Of The RMB Exchange Rate Market-oriented Reforms

The reform of RMB Exchange Rate Forming Mechanism is an important part in the process of China’s economic reform and opening up. The liberalization of RMB exchange rate is the primary goal of reform. By the background of balance of payments surplus and currency revaluation go without any change, how can PBC keep a stable exchange rate and constantly promote the reform of RMB exchange rate forming mechanism attracts the academics and policymakers concern.This paper describes the objectives, approaches and roles of central bank’s intervention in the foreign exchange market, by which I analysis the RMB exchange rate forming mechanism and the intervention of PBC in the foreign exchange market, and give a further explanation about some monopoly market structure and exceeding cost issues in the process of the current RMB exchange rate forming mechanism.Since what kind of exchange-rate regime the central bank choose exerts a strong influence on the timing, intensity and method the central bank moves, it has been the role of central bank intervention in the foreign exchange market. Therefore, the author study and learn the successful experience of India and Poland exchange rate system reform, then combine with China’s macro-economic situation to come up with the "Double-target zone" exchange rate regime which is between the "target zone" exchange rate regime and the "BBC" exchange rate regime. In this exchange rate regime, a flexible target zone and a fix target zone has been set, in which the PBC decides whether to intervent exchange rate market on the specific situation. By the end, the author will put forward some options to make the exchange rate market perform well, which concludes adjusting the structure of capital flows, supporting interventions to maintain the foreign exchange market intervention the central bank credibility.