Since 1985, the yen-dollar exchange rates repeatedly fluctuated and climbed to a level that could not be justified by economic fundamentals. The impacts on the Japanese economy were serious and far-reaching. Since 21...Since 1985, the yen-dollar exchange rates repeatedly fluctuated and climbed to a level that could not be justified by economic fundamentals. The impacts on the Japanese economy were serious and far-reaching. Since 21 July 2005, China has been moving toward a more flexible exchange rate regime. Keeping RMB exchange rates basically stable and providing Chinese industries with means to hedge exchange rate risks are essential for China＇s sound economic development.展开更多
Instability in the worm dollar standard, as most recently manifested in the US Federal Reserve＇s near-zero interest rate policy, has caused consternation in emerging markets with naturally higher interest rates. Chin...Instability in the worm dollar standard, as most recently manifested in the US Federal Reserve＇s near-zero interest rate policy, has caused consternation in emerging markets with naturally higher interest rates. China has been provoked into speeding RMB ＂internationalization ＂; that is, opening up domestic financial markets to reduce its dependence on the US dollar for invoicing trade and making international payments. However, despite rapid percentage growth in offshore financial markets in RMB, the Chinese authorities are essentially trapped into maintaining exchange controls （reinforced by financial repression in domestic interest rates） to avoid an avalanche of foreign capital inflows that would threaten inflation and asset price bubbles by driving nominal interest rates on RMB assets down further. Because a floating （appreciating） exchange rate could attract even more hot money inflows, the People＇s Bank of China should focus on keeping the yuan/dollar rate stable so as to encourage naturally high wage increases to help balance China ＂s international competitiveness. However, further internationalization of the RMB, as with the proposed Shanghai pilot free trade zone, is best deferred until world interest rates rise to more normal levels.展开更多
文摘Since 1985, the yen-dollar exchange rates repeatedly fluctuated and climbed to a level that could not be justified by economic fundamentals. The impacts on the Japanese economy were serious and far-reaching. Since 21 July 2005, China has been moving toward a more flexible exchange rate regime. Keeping RMB exchange rates basically stable and providing Chinese industries with means to hedge exchange rate risks are essential for China＇s sound economic development.
文摘Instability in the worm dollar standard, as most recently manifested in the US Federal Reserve＇s near-zero interest rate policy, has caused consternation in emerging markets with naturally higher interest rates. China has been provoked into speeding RMB ＂internationalization ＂; that is, opening up domestic financial markets to reduce its dependence on the US dollar for invoicing trade and making international payments. However, despite rapid percentage growth in offshore financial markets in RMB, the Chinese authorities are essentially trapped into maintaining exchange controls （reinforced by financial repression in domestic interest rates） to avoid an avalanche of foreign capital inflows that would threaten inflation and asset price bubbles by driving nominal interest rates on RMB assets down further. Because a floating （appreciating） exchange rate could attract even more hot money inflows, the People＇s Bank of China should focus on keeping the yuan/dollar rate stable so as to encourage naturally high wage increases to help balance China ＂s international competitiveness. However, further internationalization of the RMB, as with the proposed Shanghai pilot free trade zone, is best deferred until world interest rates rise to more normal levels.
