I. Current situation and existing problems
The RMB exchange rate 1994 was merged, and RMB became convertible under current account in February 1996 and 1. Since then, the RMB exchange rate mechanism has been established on the basis of convertibility under current account, but the exchange rate formation mechanism is mainly influenced by two factors: first, the compulsory settlement and sale of foreign exchange system, that is, other foreign exchange except the specified cash receipts and payments. Second, the central bank implements quota management on the turnover positions of designated foreign exchange banks, that is, designated foreign exchange banks must sell the turnover positions of foreign exchange settlement and sale in the inter-bank foreign exchange market in excess of their provisions in the process of handling foreign exchange settlement and sale business; When the turnover position of foreign exchange settlement and sale is insufficient, the designated foreign exchange banks must make up for it in the inter-bank foreign exchange market. Such frequent "selling" or "covering positions" will form the relationship between supply and demand in the foreign exchange market, and on this basis, form the basic exchange rate of the next day's trading currencies (US dollars, Hong Kong dollars, Japanese yen and Euro) against RMB.
Although the formation of the above exchange rate mechanism is determined by market supply and demand, in a strict sense, it has not formed a comprehensive relationship between foreign exchange supply and demand. This is because:
1. Defects of compulsory foreign exchange settlement and sale system. Although the central bank has repeatedly adjusted the revolving foreign exchange positions of designated foreign exchange banks, it cannot fundamentally change the relationship between foreign exchange supply and demand. We can only passively intervene in the market, act as the undertaker of the final balance of foreign exchange transactions, and lose the initiative of foreign exchange supervision.
2. Exchange rate changes are inelastic. Since 1994, except for 1997, China's current account and capital account have both experienced double surpluses. In the foreign exchange market, the long-term supply of RMB exceeds demand, and the intervention of the central bank in the foreign exchange market is inevitable. For this reason, the RMB exchange rate is not simply determined by market supply and demand, but is largely restricted by national macroeconomic policies. From 1995 to 200 1, the RMB appreciated by 5% against the US dollar. In recent years, the exchange rate of RMB against the US dollar only fluctuated between 1 and 8.27-8.30 RMB, with very small fluctuation range and elastic range, and the exchange rate was basically pegged to the US dollar.
3. The financial market is not perfect. China's foreign exchange market is still immature and imperfect because interest rates have not been marketized, funds cannot flow freely, and the varieties and methods of financial instruments and foreign exchange transactions are lacking. Therefore, the intervention of the central bank and the guidance of national macroeconomic policies play a great role in regulating the supply and demand of foreign exchange.
Second, the guiding principle of reform.
1. We should handle and grasp the relationship between market supply and demand and national macro-control. Correctly understanding and grasping the importance of central bank's market regulation and national macroeconomic policies is related to the stable and safe operation of China's economy. Because the reform of exchange rate mechanism must first ensure the stability of economic operation.
We should consider the general requirements of an open economy. In the reform of RMB exchange rate mechanism, the possible changes after China's further integration into the world economic system should be fully considered. According to the overall characteristics of open economy and China's own characteristics, the reform of RMB exchange rate mechanism should be linked to the changes in economic structure, so as to increase the scope and intensity of RMB exchange rate policy.
3. Maintain and realize the stability and balance of exchange rate. How to determine the exchange rate level of a country's currency and maintain an "optimal" or "appropriate" exchange rate level involves the so-called equilibrium exchange rate problem, that is to say, the exchange rate change and the internal and external relations of an economy can be coordinated and reasonable, so as to promote and realize the internal and external balance and the balance between total supply and total demand, and give full play to the RMB exchange rate as a lever to regulate the whole national economy.
We should fully understand the international status of RMB. In recent years, China's economic status and total trade volume have been greatly improved and developed, especially during the Asian financial crisis, the firm policy stance of not devaluing the RMB established its position as one of the major currencies in Asia. The influence of RMB in the surrounding areas of China has increased, but we should also be soberly aware that RMB is still a "marginal" currency compared with international currencies such as the US dollar, the Japanese yen and the euro, and the determination of exchange rate level and the adjustment of pegged target are deeply influenced by changes in the international economic environment. The turbulent international financial market environment has brought great difficulties to the adjustment of RMB exchange rate mechanism and the new equilibrium level. Therefore, the reform of RMB exchange rate mechanism must fully consider the influence of international environment, especially the exchange rate fluctuation trend of the three major currencies. Therefore, the adjustment of RMB exchange rate mechanism in the future should focus on the objectives of domestic policies, take into account the future prospects of RMB internationalization, and give due consideration to the responsibilities and obligations of RMB as a regional leading currency.
We should fully consider the influence of international capital flow. For a long time, the formulation and adjustment of China's exchange rate policy cannot completely get rid of the traditional thinking based on trade balance. The trade balance plays a leading role in determining the RMB exchange rate, and the deviation between the exchange rate and the foreign trade exchange cost once became an important symbol to measure whether the exchange rate level is reasonable.
With the continuous inflow of foreign capital in China, the scale and structure of capital flow have more and more significant influence on RMB exchange rate. From the perspective of development, after China's entry into the World Trade Organization, the scale and structure of China's capital flows have been adjusted to some extent. First of all, China's accession to the World Trade Organization has provided a new growth impetus for China's utilization of foreign capital, which has led to a new breakthrough in the scale of China's capital inflow. In the global transnational investment, the investment in service industry is more than half. After joining the World Trade Organization, China has opened up some service fields, especially in the fields of finance, insurance, securities, commerce and intermediary services, which is equivalent to doubling the number of potential investors. Secondly, after China's accession to the World Trade Organization, it will implement a more open policy, and China will have more ways to use foreign capital. In addition to foreign direct investment and foreign borrowing, China will adopt more forms of financing, such as issuing overseas bonds and stocks. It is estimated that the relative proportion of foreign direct investment will decrease, and the relative proportion of other investments will increase, especially the amount of securities investment funds will increase. Thirdly, after China's accession to the World Trade Organization, the specific mode and structure of China's foreign direct investment may be adjusted, leading to the improvement of the overall liquidity.
Since 200 1, the amount of foreign capital flowing into China has increased substantially, indicating that China's optimistic expectation of joining the World Trade Organization has begun to play a role. In addition, China's foreign investment will also enter a period of rapid growth.
The new situation of two-way cross-border capital flow requires us to appropriately increase the influence weight of international capital flow in the reform of RMB exchange rate mechanism, and expand the exchange rate policy goal from trade balance to balance of payments and structure.
6. Adapt to the principle of internationalization. After China's accession to the World Trade Organization, the reform of exchange rate mechanism will be carried out under the framework of full opening of financial markets, so it is necessary to follow the principles of free competition, free trade, non-discrimination and transparency advocated by the World Trade Organization. Under this principle, China's economy should be fully integrated with the international community in order to adapt to and respond to the challenges of economic and financial globalization. To realize the international integration of economy and finance, it is necessary to remove the obstacles to the free flow of domestic and foreign capital, which requires the marketization of domestic and foreign capital prices, first of all, the marketization of interest rates, and then the marketization of exchange rates. That is to say, under the condition of gradually opening the capital account, realizing the free convertibility of RMB is the basis of the value comparison between RMB and foreign currency and the market equilibrium exchange rate formed by free convertibility. Only in this way can the domestic and international market price signals be reflected more directly, quickly and accurately, China's economy can be in line with the international economy that implements the principles of free competition and free trade, the domestic price system can be gradually in line with the international market price system, and the competition mechanism can be reflected at all levels.
Third, the steps and measures of reform.
On the basis of the principle that the RMB exchange rate should be balanced and relatively stable, which is conducive to the long-term stability of the currency and the balance of international payments, and is conducive to the economic development of China and the world, we should increase the marketization and flexibility of exchange rate formation, so as to keep the exchange rate at a relatively balanced and stable level, thus promoting healthy and stable economic development.
The core of the reform is: (1) gradually increase exchange rate flexibility; (2) Gradually use the fluctuation range of exchange rate and relax the fluctuation range; (3) On the basis of relaxing the floating range of the exchange rate, the dollar is pegged to a basket of currencies.
Generally speaking, the reform process should adopt a gradual approach. Steps and measures that can be taken are:
1. We should conscientiously sum up the positive and negative experience of the previous exchange rate operation. 1994 RMB exchange rate was merged, 1996 China realized RMB convertibility under current account, 1998 RMB exchange rate experienced the test of financial crisis, and 2001/China successfully joined the World Trade Organization. At present, under the new situation, the RMB exchange rate mechanism should better serve the establishment and improvement of the socialist market economy and better meet the challenges of economic and financial globalization. Therefore, we should seriously summarize and reflect on the formation, characteristics and problems of RMB exchange rate system in various periods and stages since the founding of New China, combining the economic and political background and foreign economic and trade exchanges at that time. Only on the basis of in-depth summary of the past can we better reform the RMB exchange rate mechanism under the new situation.
2. Actively promote basic theory and empirical analysis. Under the guiding principle of RMB exchange rate mechanism reform, we should further encourage and promote the basic theoretical research and empirical analysis of RMB exchange rate. Generally speaking, under the attention of the State Council, the leader of the CPC Central Committee, and with the joint efforts of practitioners, researchers and teaching staff of various departments, scientific research institutions and universities, considerable achievements have been made in the study of RMB exchange rate in various periods. Their research results have played a positive role in the reform of RMB busy tone rate and policy formulation at all stages. At present, we should continue to carry out in-depth research and discussion, such as international axiology, purchasing power parity theory, export exchange cost, theoretical price comparison model, equilibrium exchange rate model, exchange rate early warning model and other related models and schemes, such as pegged to a single currency or a basket of currencies, crawling floating, managed floating, autonomous floating, central exchange rate, etc., which are worth studying and discussing. On the basis of research, discussion and empirical analysis, the relevant scheme that is more suitable for China's RMB exchange rate operation mechanism is obtained for decision-making reference.
3. Environment and opportunity for reform. Since the Asian financial crisis, the discussion on RMB exchange rate among domestic economists has intensified, especially in 2003, when the Japanese authorities provoked the view that RMB was undervalued, which attracted the attention of the international community. However, these discussions are often limited to the debate on exchange rate appreciation or depreciation and reduced to simple policy explanations and explanations. With China's entry into the World Trade Organization and deeper integration into the world economic system, the influence of exchange rate will break through the traditional foreign-related economic category and exert stronger influence in a wider scope. Therefore, the reform of RMB exchange rate must take into account such a big environment at home and abroad, and we must be cautious and choose a favorable opportunity. In other words, in the choice of the timing of reform, we should consider both domestic demand and changes in the international environment. You can't rush it, and you can't stay the same. The reform of exchange rate mechanism is bound to benefit the stability and development of China's economy and the world economy.
4. Return to real management floating. In the reform of foreign exchange management system from 65438 to 0994, the RMB exchange rate system was redefined as "a managed floating exchange rate system based on market supply and demand". However, in the actual operation in previous years, the fluctuation range of RMB against the US dollar was controlled within a very small range and remained basically unchanged. In fact, it is a fixed exchange rate system pegged to the US dollar.
The final choice of RMB exchange rate system depends on the preference of policy departments for different schemes and the balance of goals in the famous "impossible trinity" of "independent monetary policy ―― free capital flow ―― exchange rate stability". The author believes that for large economies with increasingly obvious domestic demand-oriented characteristics, independent monetary policy is undoubtedly our first choice, and the freedom of capital flow will be significantly improved in the next five years, so the result will inevitably be the increase of RMB exchange rate volatility. The above changes are finally implemented in the adjustment of the exchange rate system, but the RMB exchange rate must be carefully managed and freely floated. Another option is a completely flexible and managed floating exchange rate system. On the basis of the current exchange rate level, the fluctuation range can be expanded to 1%.
Establish an internal exchange rate target area, which can be set to10-15%. Change the basket of currencies according to the camera. Judging from the weighted composition of the basket, due to the large trade volume between China and the United States and Hong Kong, and the Hong Kong dollar is linked to the US dollar, the US dollar still accounts for the main proportion in the basket. After the euro, Japanese yen and other related currencies enter the basket, the RMB exchange rate will become more reasonable. At the same time, strengthen the varieties and methods of foreign exchange market transactions, further improve the efficiency of resource allocation in the foreign exchange market, improve the market maker system, and lay the foundation for the formation of the RMB exchange rate mechanism.
5. Establish RMB exchange rate monitoring mechanism. With the increasing marketization of RMB exchange rate mechanism, the establishment of RMB exchange rate monitoring mechanism aims to monitor whether the RMB exchange rate level conforms to the actual and national long-term policy objectives, thus providing decision-making basis for the state to formulate and adjust exchange rate policies.
The RMB exchange rate monitoring system includes macro-monitoring system and micro-monitoring system. Macro-monitoring indicators include money supply, inflation rate, fiscal revenue and expenditure, import and export growth rate, capital flow and other data. By establishing a macro-monitoring system, we can understand the influence of exchange rate level on macroeconomic indicators in a period, predict the trend of foreign exchange supply and demand and market exchange rate the next day, and thus study and adjust exchange rate policies. Microeconomic indicators include export exchange costs, import and export gains and losses, actual tax burden, foreign debt and debt service, profit remittance, etc. Observe the changes of micro-situation, monitor the rationality of exchange rate level, understand the expectations of enterprises on exchange rate, and predict the possible changes of foreign exchange supply and demand.
The macro and micro monitoring indicators obtained through the exchange rate monitoring system can be used to compile the nominal effective exchange rate index (NEER) and the real effective exchange rate index (REER) of RMB in the current quarter and year. Observing the change of the real effective exchange rate index can accurately understand the influence of RMB exchange rate on foreign-related enterprises in China, reflect the change of the actual competitiveness of China's trade sector, and is of great significance to the development of China's export industry and import substitution industry.
6. Strengthen and improve the construction of foreign exchange supervision system. While gradually and orderly liberalizing capital account control, it is especially necessary to strengthen the supervision of short-term liquidity and take corresponding measures when necessary to prevent the impact of international liquidity on China's financial market. Deregulation, strengthening supervision and replacing supervision with supervision will be the core of China's foreign exchange administration in the future. Even under the condition of realizing convertibility under capital account, we can't ignore the guidance of national macroeconomic policies and the intervention and regulation role of the central bank. At the same time, we should always pay attention to the trend of financial markets around China, dynamically measure the relative level changes of RMB against the currencies in surrounding areas, and maintain the competitiveness of China in exporting and utilizing foreign capital.