China implements a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies, allowing the RMB to appreciate by 2% against the US dollar. This decision of the People's Bank of China marks that China's exchange rate system reform and economic growth strategy adjustment are entering a new stage.
Floating exchange rate system refers to an exchange rate system in which a country's monetary authorities no longer stipulate the exchange rate and exchange rate fluctuation range between its own currency and foreign currencies, and the monetary authorities do not undertake the obligation to maintain the exchange rate fluctuation boundary, but let the exchange rate fluctuate freely with the change of supply and demand in the foreign exchange market.
1since March 1973, the fixed exchange rate system centered on the US dollar has ceased to exist in the global financial system and has been replaced by a floating exchange rate system. Most countries that implement floating exchange rate system are major industrial countries in the world, such as the United States, Britain, Germany and Japan. Most other countries and regions still implement the pegged exchange rate system, and most of their currencies are linked to the US dollar, Japanese yen and French franc. After the floating exchange rate system is implemented, the legal gold content of currency or the parity of paper money with gold in other countries will not play any role. Therefore, the national exchange rate system tends to be complicated and market-oriented.
Under the floating exchange rate system, countries no longer stipulate the fluctuation range of exchange rate, and the central bank no longer undertakes the obligation to maintain the upper and lower limits of fluctuation. The exchange rates of various countries are the result of their own fluctuation and adjustment according to the foreign exchange supply and demand in the foreign exchange market. At the same time, the change of foreign exchange supply and demand caused by a country's balance of payments situation is the main factor affecting the exchange rate change-in countries with surplus balance of payments, foreign exchange supply increases, foreign currency prices fall, and exchange rates float downward; In countries with balance of payments deficits, foreign exchange demand increases, foreign currency prices rise and exchange rates rise. Exchange rate fluctuation is a normal phenomenon in the foreign exchange market. A country's currency exchange rate rises, which means currency appreciation and falls, which means depreciation. It should be said that the floating exchange rate system is an improvement of the fixed exchange rate system. With the continuous reform of the global international monetary system, the International Monetary Fund (IMF) revised the terms of "IMF" on April 1. 0978 and took effect, and implemented a "managed floating exchange rate system". Because the new exchange rate agreement gives countries great freedom in the choice of exchange rate system, countries have various exchange rate systems, such as single floating, pegged floating, flexible floating, joint floating and so on.