The exchange rate reform initiated on August 11,2015 is an important attempt by the PBoC to transform China's exchange rate regime from the"crawl-like arrangement"to a floating regime.However,after a thr...The exchange rate reform initiated on August 11,2015 is an important attempt by the PBoC to transform China's exchange rate regime from the"crawl-like arrangement"to a floating regime.However,after a three-day experiment,the PBoC abandoned the original goal of the reform.Since then,the central bank has implemented a new exchange rate-setting mechanism.Under this mechanism,the central parity of the renminbi(RMB)against the US dollar is decided by the arithmetic average of the RMB exchange rate that keeps the index of a currency basket unchanged over the past 24 hours and the previous day's closing price of USD/CNY.Due to the introduction of the index of a currency basket,additional uncertainty has been introduced into the determination of the RMB exchange rate,because of the uncertainty of the dollar index(USDX).As a result,to a certain extent,the one-way bet on the RMB expectations is weakened.However,the current exchange rate formation mechanism cannot reverse the trend of devaluation of the RMB,nor can it eliminate depreciation expectations.Meanwhile,it hinders the effectiveness of central bank's independent monetary policy based on the domestic economic fundamentals.And also,the"two-way float"created by the new price-setting mechanism is artificial and has led to significant losses of foreign exchange reserve.The paper explains how the new price-setting mechanism works,and identifies the important features of the mechanism and its pros and cons.The paper argues that despite some advantages,the new exchange rate regime as a soft peg regime is not sustainable and the PBoC should stop foreign exchange market intervention as soon as possible.We hope that the PBoC can learn the lessons from the failure of the"August 11 reform"and accomplish the unaccomplished reform in an urgent manner.展开更多
After showing a moderate two-way fluctuation for nearly three months, the RMB exchange rate quickly surged in the middle of September, but the increasing rate of the exchange rate of RMB against the dollar remained sl...After showing a moderate two-way fluctuation for nearly three months, the RMB exchange rate quickly surged in the middle of September, but the increasing rate of the exchange rate of RMB against the dollar remained slow. Will the RMB appreciation be rapid enough to meet the demand from the United States？ And if so, would the global trade balance be restored within a short period of time？展开更多
Bearish sentiment about the Chinese economy has surged in recent months, owing largely to three conjectures. First, China’s housing market is on the brink of collapse. Second, China’s fiscal position will worsen rap...Bearish sentiment about the Chinese economy has surged in recent months, owing largely to three conjectures. First, China’s housing market is on the brink of collapse. Second, China’s fiscal position will worsen rapidly because of massive local government debt. And, third, the collapse of underground credit networks in cities such as Wenzhou, Zhejiang province, will lead to a broad financial crisis across the country. In fact, despite its problems, China’s economy remains on course and it is not yet anyway near to hitting the rocks. In the last decade, skyrocketing house prices, except for a short展开更多
文摘The exchange rate reform initiated on August 11,2015 is an important attempt by the PBoC to transform China's exchange rate regime from the"crawl-like arrangement"to a floating regime.However,after a three-day experiment,the PBoC abandoned the original goal of the reform.Since then,the central bank has implemented a new exchange rate-setting mechanism.Under this mechanism,the central parity of the renminbi(RMB)against the US dollar is decided by the arithmetic average of the RMB exchange rate that keeps the index of a currency basket unchanged over the past 24 hours and the previous day's closing price of USD/CNY.Due to the introduction of the index of a currency basket,additional uncertainty has been introduced into the determination of the RMB exchange rate,because of the uncertainty of the dollar index(USDX).As a result,to a certain extent,the one-way bet on the RMB expectations is weakened.However,the current exchange rate formation mechanism cannot reverse the trend of devaluation of the RMB,nor can it eliminate depreciation expectations.Meanwhile,it hinders the effectiveness of central bank's independent monetary policy based on the domestic economic fundamentals.And also,the"two-way float"created by the new price-setting mechanism is artificial and has led to significant losses of foreign exchange reserve.The paper explains how the new price-setting mechanism works,and identifies the important features of the mechanism and its pros and cons.The paper argues that despite some advantages,the new exchange rate regime as a soft peg regime is not sustainable and the PBoC should stop foreign exchange market intervention as soon as possible.We hope that the PBoC can learn the lessons from the failure of the"August 11 reform"and accomplish the unaccomplished reform in an urgent manner.
文摘After showing a moderate two-way fluctuation for nearly three months, the RMB exchange rate quickly surged in the middle of September, but the increasing rate of the exchange rate of RMB against the dollar remained slow. Will the RMB appreciation be rapid enough to meet the demand from the United States？ And if so, would the global trade balance be restored within a short period of time？
文摘Bearish sentiment about the Chinese economy has surged in recent months, owing largely to three conjectures. First, China’s housing market is on the brink of collapse. Second, China’s fiscal position will worsen rapidly because of massive local government debt. And, third, the collapse of underground credit networks in cities such as Wenzhou, Zhejiang province, will lead to a broad financial crisis across the country. In fact, despite its problems, China’s economy remains on course and it is not yet anyway near to hitting the rocks. In the last decade, skyrocketing house prices, except for a short
