Capital Account Liberalization and Exchange Rate Regime Choice in China

Author: Li Jing
Publisher:
Publish Date: 2006-08-01
Features: This book analyzes the multiple evolutions of the Chinese yuan exchange rate system arrangement since the announcement of the yuan's exchange rate in 1949, as well as the economic transition characteristics behind the gradual move toward marketization and flexibility of the yuan's exchange rate. The book examines the theoretical logic of the exchange rate exit strategy and the exit experiences of transition countries, proposing a specific path for the yuan to smoothly exit its current adjustable managed floating system. China needs to learn from the debates over yuan depreciation and appreciation, reduce the political color of the yuan, and create a better external environment for reform. In response to the current narrow-range fluctuation of the yuan exchange rate, it proposes a reference observation range to enhance the credibility of monetary authorities, anchor public expectations, and improve the effectiveness of monetary policy. Further, it introduces market forces into the formation of the yuan exchange rate. To address the financial risks associated with the non-international currency status of the yuan, which affect its capital account convertibility and floating exchange rate implementation, the book proposes a phased strategic deployment to coordinate the reforms of the yuan exchange rate, capital account liberalization, and the regionalization process of the yuan.