The exchange rate reform initiated on August 11,2015 is an important attempt by the PBoC to transform China's exchange rate regime from the "crawl-like arrangement" to a floating regime.However,after a t...The exchange rate reform initiated on August 11,2015 is an important attempt by the PBoC to transform China's exchange rate regime from the "crawl-like arrangement" to a floating regime.However,after a three-day experiment,the PBoC abandoned the original goal of the reform.Since then,the central bank has implemented a new exchange rate-setting mechanism.Under this mechanism,the central parity of the renminbi(RMB) against the US dollar is decided by the arithmetic average of the RMB exchange rate that keeps the index of a currency basket unchanged over the past 24 hours and the previous day's closing price of USD/CNY.Due to the introduction of the index of a currency basket,additional uncertainty has been introduced into the determination of the RMB exchange rate,because of the uncertainty of the dollar index(USDX).As a result,to a certain extent,the one-way bet on the RMB expectations is weakened.However,the current exchange rate formation mechanism cannot reverse the trend of devaluation of the RMB,nor can it eliminate depreciation expectations.Meanwhile,it hinders the effectiveness of central bank's independent monetary policy based on the domestic economic fundamentals.And also,the "two-way float" created by the new price-setting mechanism is artificial and has led to significant losses of foreign exchange reserve.The paper explains how the new price-setting mechanism works,and identifies the important features of the mechanism and its pros and cons.The paper argues that despite some advantages,the new exchange rate regime as a soft peg regime is not sustainable and the PBoC should stop foreign exchange market intervention as soon as possible.We hope that the PBoC can learn the lessons from the failure of the "August 11 reform" and accomplish the unaccomplished reform in an urgent manner.展开更多
The Renminbi(RMB)exchange rate regime reform has gone through three stages roughly once every decade since 1994.It is a structural evolution through the unification of dual exchange rates,increased fluctuations and ce...The Renminbi(RMB)exchange rate regime reform has gone through three stages roughly once every decade since 1994.It is a structural evolution through the unification of dual exchange rates,increased fluctuations and central parity rate reform in response to the dynamic macro environment in China and abroad.This paper unpacks leading and supporting reforms for each stage and reviews the effects.The reform has developed historical experience in adopting progressive strategies,avoiding sharp exchange rate fluctuations in the near term,maintaining appropriate capital controls,and guaranteeing the reform through domestic structural reforms.Achieving a free-floating exchange rate will be the ultimate goal,but it will not be made easily in the short run.During the transitional period,it is recommended that an annual target zone for RMB's effective exchange rate be arranged for the CFETS currency basket,along with necessary capital controls.展开更多
With balance of payments in China and the RMB exchange rate approaching the equilibrium level,political gaming of domestic interest groups rather than international political pressures plays a more important role in f...With balance of payments in China and the RMB exchange rate approaching the equilibrium level,political gaming of domestic interest groups rather than international political pressures plays a more important role in future bidirectional changes of the RMB exchange rate.From the perspective of political economics,this paper analyses the dynamics of exchange rate preferences of domestic interest groups and their role in the evolution of RMB exchange rate regimes.The findings show that interest groups and their exchange rate preferences do play a significant role in RMB exchange rate reforms,which implicates that it is necessary to take account of policy preferences and political gaming of interest groups in the determination and forecasts of the RMB exchange rate.展开更多
文摘The exchange rate reform initiated on August 11,2015 is an important attempt by the PBoC to transform China's exchange rate regime from the "crawl-like arrangement" to a floating regime.However,after a three-day experiment,the PBoC abandoned the original goal of the reform.Since then,the central bank has implemented a new exchange rate-setting mechanism.Under this mechanism,the central parity of the renminbi(RMB) against the US dollar is decided by the arithmetic average of the RMB exchange rate that keeps the index of a currency basket unchanged over the past 24 hours and the previous day's closing price of USD/CNY.Due to the introduction of the index of a currency basket,additional uncertainty has been introduced into the determination of the RMB exchange rate,because of the uncertainty of the dollar index(USDX).As a result,to a certain extent,the one-way bet on the RMB expectations is weakened.However,the current exchange rate formation mechanism cannot reverse the trend of devaluation of the RMB,nor can it eliminate depreciation expectations.Meanwhile,it hinders the effectiveness of central bank's independent monetary policy based on the domestic economic fundamentals.And also,the "two-way float" created by the new price-setting mechanism is artificial and has led to significant losses of foreign exchange reserve.The paper explains how the new price-setting mechanism works,and identifies the important features of the mechanism and its pros and cons.The paper argues that despite some advantages,the new exchange rate regime as a soft peg regime is not sustainable and the PBoC should stop foreign exchange market intervention as soon as possible.We hope that the PBoC can learn the lessons from the failure of the "August 11 reform" and accomplish the unaccomplished reform in an urgent manner.
基金funded by the Center for Modern Financial Studies under Shanghai Jiao Tong University,presents the latest progress in CASS's innovation project on Development Trends and Interconnections of Global and Chinese Financial Markets.
文摘The Renminbi(RMB)exchange rate regime reform has gone through three stages roughly once every decade since 1994.It is a structural evolution through the unification of dual exchange rates,increased fluctuations and central parity rate reform in response to the dynamic macro environment in China and abroad.This paper unpacks leading and supporting reforms for each stage and reviews the effects.The reform has developed historical experience in adopting progressive strategies,avoiding sharp exchange rate fluctuations in the near term,maintaining appropriate capital controls,and guaranteeing the reform through domestic structural reforms.Achieving a free-floating exchange rate will be the ultimate goal,but it will not be made easily in the short run.During the transitional period,it is recommended that an annual target zone for RMB's effective exchange rate be arranged for the CFETS currency basket,along with necessary capital controls.
基金This work was supported by the National Social Science Fund of China(15BGJ034).
文摘With balance of payments in China and the RMB exchange rate approaching the equilibrium level,political gaming of domestic interest groups rather than international political pressures plays a more important role in future bidirectional changes of the RMB exchange rate.From the perspective of political economics,this paper analyses the dynamics of exchange rate preferences of domestic interest groups and their role in the evolution of RMB exchange rate regimes.The findings show that interest groups and their exchange rate preferences do play a significant role in RMB exchange rate reforms,which implicates that it is necessary to take account of policy preferences and political gaming of interest groups in the determination and forecasts of the RMB exchange rate.
