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Flexibility and independence - On the reform of RMB exchange rate mechanism


Program. Weigh the costs and benefits of the RMB exchange rate adjustment can bring any benefits? Usual view is that if the RMB appreciation, first of all can reduce the cost of imports and save with imported oil, timber, iron ore,[link widoczny dla zalogowanych], on the expenditure. Help to suppress inflation faced; Second, the exchange rate adjustment will help ease the macroeconomic overheating. In addition, China's foreign debt interest payments will help pay the cost reduction. And conducive to promoting industrial upgrading and reform of China's economic structure. The Chinese Government on RMB appreciation biggest concern is the appreciation may lead to labor-intensive exports decline, leading to increased unemployment. Estimates indicated. If the RMB appreciate by 5% (this is within tolerance), the export growth will decline by 2.5%, while imports increased by 3%. But the appreciation of 5% of the limited digestion of inflation, only 0.3%, that is, it is difficult to replace a possible rate hike. For employment. 10% appreciation of the renminbi. Will affect the employment of 100 million people. If you expand the floating range of RMB progressive, such as the appreciation of 3% within a year of a 5% increase during the period of employment through other means will be enough to absorb the losses caused by the appreciation. Choice of reform path, then, the RMB exchange rate adjustment can take options? Was advocated floating exchange rate; was suggested to expand the floating range of RMB exchange rate; was suggested that the RMB exchange rate pegged to a basket currency (publish or not to disclose the football sub-) regulation exchange rate system; also been advocated in place before one-time adjustment pegged to the dollar. There are several issues one-time revaluation. First, there should be difficult to determine the magnitude of one-off revaluation. In the present circumstances, almost any one-off appreciation of the magnitude of all investors will not be able appreciation of the renminbi is expected to total elimination. If the rate of appreciation is too small, it could lead to a stronger appreciation once again expected to bring more hot money inflows. The appreciation is too large, would have on domestic exports, a major blow to oil and other industries. And if there was not enough band, and a fully floating system, which in turn is no different. The dollar peg exchange rate system the exchange rate regime,[link widoczny dla zalogowanych], a period of time, reducing the exchange rate risk, to ensure the safety of the financial markets and macroeconomics. But in the current new situation, it can not correct the exchange rate misalignment, the price of the RMB exchange rate distortions. In particular the U.S. dollar against the euro, yen and other major currencies fluctuations between, a single exchange rate regime pegged to the dollar cost of imports for the stability and export competitiveness adversely affected. Current. China's economy more representative of the views, first, and then pegged to the one-time adjustment. The second is to take Over time,[link widoczny dla zalogowanych], any currency exchange rate fixed (or pegged) are relative, not absolute. However. A regular change in the exchange rate floating exchange transaction costs that is not conducive to trade, investment and other foreign economic activity, economic development will be a great impediment. This is why the European countries to give up their own independent monetary policy and adopt a uniform euro. In 2004, China's foreign trade volume accounted for 70% of the gross national product. China's foreign trade exchange rate instability caused by the additional transaction costs are enormous. However, long undervalued exchange rate can also cause huge losses. The best solution to solve this problem choice are: adjustment - stare - and then adjust - then pegged. This is one of the most simple, is relatively the best solution. Of course,[link widoczny dla zalogowanych], this choice does not rule out re-adjustment - the possibility of re-peg. Here are four must pay attention to details. First of all. Decision-making should be one day suddenly announced one-time adjustment of the RMB exchange rate, and announced at this stage and never move. To cut off the pre-and post speculation the yuan is expected; Secondly, in order to meet the new exchange rate stability, control currency, capital project is not open; third, one-time adjustments pegged to the dollar is still the best choice, but also should be prepared exchange rate adjustment in the next step is to abandon U.S. dollar and pegged to a basket of major currencies; last. Choose this one-time adjustment with great skill. In general, the adjustment of 5% to 7% is more acceptable choice. There are domestic economists believe that China is the most suitable for Published by fact, but not medium-term reference effective exchange rate of the system,[link widoczny dla zalogowanych], and allow the slow change in the short term central exchange rate levels. In this mode, the central bank's internal calculation of several models of real or nominal exchange rate, program results as a reference to goals, guiding the central rate of the long-term trend, but the short term is not rigidly adhere to this. This can make China's exchange rate with sufficient flexibility, while ensuring that the choice of monetary policy, China has sufficient independence. I (Author: The easy to futures) 2005.7 Province, the amount of 53 turtles j

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