Comprehensive analysis of the historical reasons of exchange rate reform and the evolution of RMB exchange rate system 1994, China has experienced fixed exchange rate system and dual-track system. After the merger of exchange rates from 65438 to 0994, China implemented a managed floating exchange rate system based on market supply and demand. Enterprises and individuals buy and sell foreign exchange from banks according to regulations, and banks enter the inter-bank foreign exchange market for transactions, forming a market exchange rate. The central bank sets a certain floating range of exchange rate to keep the RMB exchange rate stable by regulating the market. Before 1997, the RMB exchange rate rose steadily. After the outbreak of the Southeast Asian financial crisis, the floating range of RMB exchange rate narrowed, and in fact a fixed exchange rate system pegged to the US dollar was implemented. As can be seen from the table 1, the exchange rate of RMB against the US dollar has generally experienced a process of continuous depreciation in the past 25 years, from 198 1 to 1.70 RMB to 8.6 1 RMB during the exchange reform period, and then, (1) Analysis of the reasons for the reform of RMB exchange rate system: China began to implement a managed floating exchange rate system based on market supply and demand in 1994. In fact, it is pegged to the US dollar after 1997. The exchange rate system conformed to the national conditions of China at that time, and made positive contributions to the sustained and rapid economic development of China and the maintenance of regional and even world economic and financial stability. However, after 2000, with the changes of economic and financial situation at home and abroad, the original exchange rate system also exposed some drawbacks. 1.Since 2000, the balance of payments has been seriously unbalanced, and China's "double surplus" in current account and capital account has been expanding continuously, especially in 2004. There are two main reasons for this: first, in recent years, the dollar has been depreciating. Because the renminbi is pegged to the dollar, it has also depreciated. Compared with the rapid economic growth in China, the RMB is undervalued to some extent. To a certain extent, this has enhanced the competitiveness of China's exports of goods and services and expanded the current account surplus; Second, the expected appreciation of RMB increased foreign investment in China, especially the inflow of a large number of short-term funds, which led to the rapid expansion of China's capital and financial account surplus. The expanding "double surplus" of China's balance of payments has aggravated the trade friction between China and other countries, especially the United States and Europe have repeatedly provoked trade wars with China. 2. The independence of monetary policy is challenged. Influenced by the surplus of China's balance of payments in successive years, China's foreign exchange reserves have grown extremely rapidly in recent years, with an increase of 206.7 billion US dollars in 2004 alone, an increase of nearly 50%. By the end of June 2005, China's foreign exchange reserves had reached 7 1 1 billion dollars. The rapid growth of foreign exchange reserves led to the excessive growth of China's money supply, and inflation pressure appeared in 2004. In order to curb the phenomenon of excessive credit supply, blind investment and serious redundant construction in some domestic industries and regions, the People's Bank of China has to hedge its foreign exchange holdings in the open market, and the hedging ratio is constantly increasing, so that there are no coupons available. The independence and effectiveness of China's monetary policy are greatly challenged by the continuous issuance of central bank bills to withdraw funds. 3. With the influx of international hot money since1997, China's exchange rate system essentially pegged to the US dollar has not only promoted China's export development and attracted foreign investment, but also left an opportunity for the invasion of international hot money. In recent ten years, with the sustained and rapid economic development in China and the increasing foreign exchange reserves in China, the international expectation of RMB appreciation in China has been rising, and international speculators have entered China in large numbers through various channels to bet on RMB appreciation. The influx of hot money greatly harms the stability of China's financial system, reduces the effectiveness of monetary policy, increases China's financial risks, and is not conducive to the stable development of macro-economy. Therefore, in order to further strengthen China's economic and financial stability, it is necessary to reform the system of linking the RMB to the US dollar. (II) Analysis of the Timing of RMB Exchange Rate System Reform Although European and American countries have repeatedly pressured RMB to appreciate since 2003, the China authorities have resisted the pressure and maintained the stability of RMB exchange rate. It is more scientific to adjust the exchange rate system under the current situation that the expectation of RMB appreciation is decreasing, which has played an unexpected role. 1. Analysis of domestic conditions Judging from the actual situation in China, the conditions for RMB exchange rate adjustment are relatively mature. First of all, China's national economy continued to maintain a steady and rapid growth momentum. The GDP growth rate was as high as 9.5% in 2004, and it still maintained 9.5% in the first half of this year, which laid a solid economic foundation for the reform of RMB exchange rate system. Secondly, after more than a year's efforts, China's economic macro-control has achieved good results. The overheated domestic investment in fixed assets has entered a relatively stable state, and inflation has been well controlled. In the first half of this year, the consumer price level has dropped to 2.3%. Third, China's foreign exchange market has developed rapidly, and the financial reform has achieved remarkable results, such as the gradual relaxation of foreign exchange management, the continuous strengthening of foreign exchange market construction, the gradual promotion of market tools, and substantial progress in various financial reforms. This has created market conditions for the normal operation of the RMB exchange rate system after the reform. 2. Analysis of International Conditions The international conditions for the reform of RMB exchange rate system are becoming more and more mature. Recently, due to the accelerated growth of the US economy and the continuous interest rate increase by the Federal Reserve, the weak dollar since 200 1 has recently started to strengthen. From June 5438+ 10 this year, the exchange rate of the US dollar against the euro and the Japanese yen began to appreciate significantly. Since the RMB exchange rate is pegged to the US dollar, the exchange rate of RMB against non-US dollar currencies will also strengthen, the expectation of RMB appreciation will be reduced, and the pressure of appreciation will be alleviated. This has created favorable external conditions for the reform of RMB exchange rate formation mechanism and eased the external impact brought about by the reform of RMB exchange rate system. -study the current exchange rate system and correctly understand the fluctuation of RMB exchange rate. Analysis of the reform content and its influence (I) Interpretation of the reform content of RMB exchange rate system The main content of this reform is to change the RMB exchange rate peg to the US dollar as a reference. That is, the RMB exchange rate is no longer pegged to a single dollar, but according to the actual situation of China's foreign economic development, several major currencies are selected and given corresponding weights to form a currency basket. At the same time, according to the domestic and international economic and financial situation, based on market supply and demand, the change of RMB multilateral exchange rate index is calculated with reference to a basket of currencies, and the RMB exchange rate is managed and adjusted to keep the RMB exchange rate basically stable at a reasonable and balanced level. Reference to a basket indicates that exchange rate changes between foreign currencies will affect the RMB exchange rate, but reference to a basket does not mean pegging to a basket of currencies. It also needs to take the relationship between market supply and demand as another important basis for the formation of a managed floating exchange rate. This reform feature embodies the principles of "initiative" and "controllability" advocated by the China government in the reform of RMB exchange rate system, which is not only conducive to the flexible operation of the exchange rate system by the government, but also will not cause excessive exchange rate fluctuations. Another important content of this reform is to slightly adjust the exchange rate of RMB against the US dollar. The RMB appreciated by 2% against the US dollar, from 1 USD to 8.27 RMB to 1 USD to 8. 165438 RMB in 0 yuan. The adjustment range is mainly determined according to the degree of China's trade surplus and the needs of structural adjustment, and the adaptability of domestic enterprises to structural adjustment is also considered. Compared with the appreciation of the Japanese yen against the US dollar after the Plaza Accord in 1980s, the China government withstood the international pressure and the RMB appreciated slightly, which was beneficial to the economic and financial stability and sustainable development of China. This feature embodies the principle of "initiative" and "gradualism" of China government in the reform of RMB exchange rate system. (II) Analysis of the impact of the small appreciation of RMB exchange rate This small appreciation of RMB exchange rate has both advantages and disadvantages for China's economy, but overall, the advantages outweigh the disadvantages. The main benefits of RMB appreciation are: first, RMB appreciation can reduce the import cost of China enterprises to a certain extent; Second, RMB appreciation can improve China's terms of trade. In recent years, China's export commodities are basically in a state of small profits but quick turnover. The growth of export profit is much lower than the growth of export volume, and the actual resource transfer speed is accelerated, which is not conducive to the sustainable development of China's economy. After the appreciation of RMB, the RMB income of exporters will decrease accordingly. In order to maintain the original profit level, they either increase the foreign selling price of export commodities or reduce the export volume of low value-added commodities, thus improving the terms of trade. Third, it is conducive to reducing international trade frictions. In recent years, foreign trade disputes such as anti-dumping against China's export commodities have intensified, and the international environment for commodity exports has deteriorated. The appreciation of RMB will increase the foreign sales price of China's goods and alleviate this situation to some extent; Fourth, it is conducive to the adjustment of China's industrial structure. On the one hand, the appreciation of RMB reduces the cost of importing advanced technology and equipment for China enterprises, which is conducive to the technological upgrading of export enterprises, especially private enterprises. On the other hand, the appreciation of RMB reduces the profit margin of China's export commodities, prompting enterprises to reduce the export of low value-added commodities and increase the export of high-tech and high value-added commodities; Fifthly, the appreciation of RMB is beneficial to the transnational investment activities of China enterprises. The appreciation of RMB saves the cost of China enterprises' foreign investment and makes it easier for domestic enterprises to "go global"; Sixth, it can slow down the growth rate of China's foreign exchange reserves, thus reducing a series of negative effects brought about by the excessive growth of foreign exchange reserves. The disadvantages of RMB appreciation are as follows: First, it will inhibit China's export trade to a certain extent. As a developing country, China's export commodities win by price to a great extent, and the appreciation of RMB weakens the price competitive advantage of many commodities, thus affecting the competitiveness of China's export commodities in the international market; Second, curbing exports will increase employment pressure. China's export enterprises are mainly labor-intensive enterprises, which have absorbed a large number of labor employment. The impact of RMB appreciation on labor-intensive enterprises is far greater than that on capital-intensive or technology-intensive enterprises. Once the export growth rate of labor-intensive products slows down, it will inevitably bring employment pressure; Third, the appreciation of RMB will slow down the growth of foreign investment in China to a certain extent, because the appreciation of RMB will increase the assets of foreign-funded enterprises already in China, but it will increase the investment cost of foreign investors who are going to invest in China. Fourthly, the appreciation of RMB provides profit opportunities for international hot money that has flowed into China, which may enhance the expectation of international hot money for the continued appreciation of RMB, thus aggravating the abnormal flow of international hot money. To sum up, the reform of RMB exchange rate system has increased the flexibility of China exchange rate system, which is more suitable for the development of market economy in China. Although a small appreciation of RMB in the short term will cause fluctuations in the price and trade volume of China's import and export commodities, in the long run, it will be conducive to the improvement of China's market economic system, the adjustment of China's industrial structure and import and export commodity structure, and thus to the sustainable development of China's foreign trade and the overall economy. -The impact of the current exchange rate system on China's money market. Before the reform, the exchange rate system restricted China's monetary policy from 1994 China's foreign exchange management system reform to this exchange rate system reform. Although the RMB exchange rate is nominally a managed floating exchange rate system, based on the Mundell-Fleming model, in the process of free capital flow, monetary policy can only truly reflect its effectiveness if it matches the floating exchange rate. Under the fixed exchange rate system, monetary policy is only effective in the short term and ineffective in the long term. In recent years, with the continuous strengthening of China's economic strength and the continuous improvement of the degree of opening to the outside world, the conflict between the arrangement of fixed exchange rate system and China's monetary policy has become increasingly obvious. Especially in this round of economic overheating, our government has issued a series of macro-control policies to intervene in the national economy, mainly using monetary policy, from "steady" a few years ago to "moderately tight". However, due to the rapid growth of China's national economy for many years, the dollar continues to fall, and the value of RMB is undervalued, which seriously restricts the implementation effect of monetary policy. (1) Declining independence of monetary policy In an open economy, there is a contradiction that the three goals of free flow of international capital, exchange rate stability and independence of monetary policy cannot be achieved at the same time, that is, the "ternary paradox". Before the reform of exchange rate system, China chose a fixed exchange rate and the independence of monetary policy, and strictly controlled international capital flows. Under the condition that a country's financial system is not perfect and its ability to resist financial risks is weak, this institutional arrangement is undoubtedly in line with the economic reality of China at that time. However, with China's accession to the WTO, under the general trend of open economy, with the gradual improvement of financial globalization and integration, the openness of domestic financial markets has been gradually strengthened, and a large influx of legal and illegal capital has made the independence of China's monetary policy impossible to achieve. In fact, in this round of economic overheating control, although the China government has stabilized the RMB exchange rate, it has lost the independence of monetary policy, and controlling inflation depends on administrative means, not monetary policy. (2) The surge in foreign exchange reserves challenges the effectiveness and initiative of monetary policy. The increase in foreign exchange reserves mainly comes from the trade surplus and the flow of "hot money". Because the value of RMB is undervalued, the expanding trade surplus and the influx of foreign "hot money" have caused the surge of China's foreign exchange reserves. In the first half of this year, China exported 342.34 billion US dollars and imported 302.69 billion US dollars, with a trade surplus of 39.65 billion US dollars, compared with a deficit of 6.8 billion US dollars in the same period last year. By the end of June, the balance of China's foreign exchange reserves was $765,438 +0 1 billion, up by 51.1%year-on-year; In the first half of the year, foreign exchange reserves increased by 1, 0 1 billion US dollars, an increase of 33.7 billion US dollars year-on-year, of which foreign exchange reserves increased by 20 billion US dollars in June alone, an increase of 8 billion US dollars. The surge in foreign exchange reserves will lead to an increase in the money supply and increase inflationary pressure. In order to alleviate the inflationary pressure caused by the growth of foreign exchange reserves, the central bank has to intensify the sterilization operation to prevent the increase of money supply, but it will also cause credit contraction, thus increasing the pressure of RMB interest rate, and then forcing the central bank to buy foreign exchange reserves and eventually increase the money supply, which will greatly reduce the central bank's efforts to change the money supply. In the first half of the year, China experienced a situation of "wide money and tight credit". In the case of credit contraction, the broad money supply (M2 composed of domestic credit and foreign exchange) still increases substantially, which shows that the intermediate target of the central bank's monetary policy is interfered by foreign exchange reserves, which greatly affects the regulation effect of monetary policy and its effectiveness is facing severe challenges. (3) The use of interest rate instruments is restricted in China. Because of the fixed exchange rate, the effect of interest rate policy tools is very limited. In addition, the international community and financial markets have strong expectations for RMB appreciation, which restricts the use of interest rate instruments: 1. Under the fixed exchange rate system, when China raises (lowers) interest rates in order to tighten (expand) regulation, it will lead to capital account surplus (deficit). In order to stabilize the exchange rate, the central bank buys (sells) foreign exchange in the foreign exchange market, thereby increasing (decreasing) foreign exchange reserves, further affecting the introduction of the base currency, and offsetting the effect of interest rate policy to some extent. 2. The expectation of the appreciation and depreciation of the US dollar led to a large trade surplus in China. Under normal economic environment, China can reduce interest rates to promote the outflow of domestic funds and foreign short-term funds, thus solving the imbalance of international payments. However, because the problem of overheating in China has not been completely solved, there is inflationary pressure, and lowering interest rates is contrary to the direction of macro-control, so that the use of interest rate instruments is facing embarrassment. 3. Due to the expectation of RMB appreciation, if the interest rate is greatly raised, overseas funds will flow into China to increase foreign exchange reserves, thus further increasing the appreciation pressure. It is precisely because the interest rate cannot be greatly raised and the domestic price level is high that the real interest rate in China is low or even negative. In the case of relatively little domestic financial investment, the stock market continues to be depressed, and various funds chase investment, especially real estate, which makes the growth rate of fixed assets investment run at a high level for a long time. The flow of "hot money" reduces the effectiveness of monetary policy. With the increasing expectation of RMB appreciation, a large number of "hot money" poured into China through various legal and illegal channels. The flow of "hot money" mainly affects the implementation of China's monetary policy in the following aspects: first, the inflow of "hot money" increases foreign exchange reserves and increases inflationary pressure, thus weakening the moderately tight monetary policy; Secondly, the liquidity of "hot money" is strong and unstable, and its rapid inflow and outflow will have a huge impact on China's financial system, thus increasing the difficulty for the central bank to use monetary policy tools to regulate; Finally, in the case that China's stock market continues to be depressed, a large amount of "hot money" is bound to enter the real estate market, which will directly affect the effect of our government's regulation of the real estate industry. Second, the reform of exchange rate system has enhanced the effectiveness of monetary policy. The reform to improve the RMB exchange rate formation mechanism has changed the situation that the exchange rate is too fixed, and formed a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. This exchange rate system makes the RMB exchange rate more flexible and enhances the effectiveness of China's monetary policy. First, in the "ternary paradox", the reform of exchange rate system has expanded the fluctuation range of China's exchange rate, which means that China has increased the independence of monetary policy by giving up the goal of exchange rate stability under the background of gradual improvement of free capital flow. Under the managed floating exchange rate system with reference to a basket of currencies, China can independently exercise its own monetary policy and automatically adjust the balance of payments through exchange rate leverage, thus changing the situation that monetary policy is passively exercised due to various factors under the fixed exchange rate system. Second, after the reform of the exchange rate system, the RMB exchange rate can be adjusted slightly according to the market supply and demand to balance the international payments, which gives the central bank a certain space for foreign exchange intervention and control, and gets rid of the dilemma of buying (selling) foreign exchange in the foreign exchange market to stabilize the exchange rate, thus passively increasing (decreasing) the base currency and improving the initiative of China's monetary policy. At present, a small appreciation of RMB, a moderate decrease in exports and an increase in imports can digest a certain amount of excess foreign exchange reserves, which is of great help to improve the effectiveness of China's monetary policy in the next stage. Third, under the floating exchange rate system, the impact of interest rate on the balance of payments can be balanced by exchange rate fluctuations, thus increasing the effectiveness of interest rate policy. For example, when China adopts a tight monetary policy, raising interest rates will increase foreign exchange reserves, but at the same time, it can affect the current account and offset the capital account surplus through RMB appreciation, thus balancing the balance of payments and improving the effectiveness of interest rate policy. Fourthly, the flexible exchange rate can increase the speculative risk of international speculative capital and reduce the influx of foreign "hot money", thus alleviating the pressure of excessive growth of foreign exchange reserves to some extent and reducing the impact of speculative capital on China's economy. -How to guard against financial risks and make good investment planning under the current exchange rate system? At present, the internal driving force of China's economic growth is still strong, and the gross domestic product maintained growth in the first half of the year. Although bank credit is tight in the first half of the year, the growth of base money will translate into the increase of bank loans sooner or later. If the money supply continues to be loose, the lending capacity of commercial banks will recover rapidly. At the same time, the rapid rise in the prices of international crude oil and major raw materials will put pressure on the price increase of downstream products, which will prevent the price increase caused by the decline in investment growth and the increase in food supply from falling to some extent. It can be seen that the inflationary pressure faced by China's economy is still relatively large. The RMB appreciation of 2% this time is a tight monetary policy for China's economy, so it has alleviated the above inflationary pressure to some extent. In view of this, in the short term, China's monetary policy should be based on "stability" and fine-tune the national economy by comprehensively using various monetary policy tools, which will play an important role in maintaining or promoting economic and price stability, improving and upgrading China's economic structure and transforming China's economic growth mode. Specifically, it includes the following aspects: First, it is not appropriate to adjust the interest rate level in the short term, so as not to cause macroeconomic fluctuations. But we can start with the interest rate structure to achieve the purpose of regulating China's national economy. This idea has been reflected in the work of the central bank in the first half of the year. Next, our government should continue to implement this idea, appropriately raise short-term interest rates, and curb overheating of investment and speculative capital inflows; At the same time, keep the medium and long-term interest rates stable and maintain sustained economic growth. Second, in terms of credit, comprehensively use monetary policy tools to guide commercial banks to increase credit supply in a targeted manner and change the tight credit situation in the first half of the year: 1. Continue to strictly control the supply of funds for investing in overheated industries to prevent price rebound and stabilize the national economy; At the same time, it is also necessary to curb the credit funds for resource and energy consumption and high-pollution industries, and optimize the economic structure of China. 2. Giving sufficient financial support to industries with growth and sustainable development, focusing on solving the financing difficulties of small and medium-sized enterprises, not only meets the needs of China's economic restructuring, but also reduces the dependence of high-quality enterprises on foreign debts, thus alleviating the pressure of passive investment of base money brought about by the increase of foreign exchange reserves. Third, in the current "troika" that promotes economic growth, investment will come down, and the net export driving force will also be weakened because of appreciation. Then, the important task of promoting sustained economic growth falls on consumption. Real estate is the pillar of national economic development. Under the background of expanding domestic demand and changing the mode of economic growth, the real estate market should bear the important responsibility of cultivating consumption power. Previously, China's monetary policy mainly aimed at excessive investment and speculative real estate speculation in the real estate industry, and adjusted the structure of the real estate market. Judging from the current results, while over-investment and speculative real estate speculation have been initially curbed, personal housing consumption has also been hit. Therefore, in the next stage, monetary policy should continue to strictly control investment-oriented housing and give appropriate support to owner-occupied housing to stimulate domestic demand. In addition, the impact of the exchange rate system reform on the real estate market in China is more complicated. On the one hand, due to the small appreciation, foreign speculative funds expect that RMB will have an appreciation cycle, so they enter China on a large scale, mainly in the real estate market; On the other hand, some speculative funds will take profits and withdraw from the real estate market. In the case that the comprehensive impact is uncertain, the central bank should closely follow the changes in the real estate market and adopt appropriate monetary policies at any time to smooth the fluctuations caused by international capital flows, so as to promote the healthy development of China's real estate industry.