The Long-Drawn Process of reform of the Exchange Rate Regime and the Evolution of China’s Exchange Rate Policy

Yu Yongding

China Economic Journal, 2018, vol. 11, issue 3, 284-300

Abstract: An inflexible exchange rate not only brings the traditional problem of impossible trinity but also contributes to the formation of China’s irrational international balance of payments structure characterized by the so-called twin surpluses (current account and capital account surpluses). As a result, though China has some 2 trillion USD net foreign assets, it runs investment income deficits for more than a decade. Furthermore, when the RMB is under appreciation pressure, the inflexibility brings about inflows of hot money. When the RMB is under depreciation pressure, the inflexibility facilitates the unwinding of carry trade and capital flights. On the whole, China is too cautious in reforming its exchange rate regime. Instead of designing various cumbersome central parity rate-setting rules, China should make up its mind to float the RMB as soon as possible.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/17538963.2018.1512542 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rcejxx:v:11:y:2018:i:3:p:284-300

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rcej20

DOI: 10.1080/17538963.2018.1512542

Access Statistics for this article

China Economic Journal is currently edited by Tiechang Gao and Yiping Huang

More articles in China Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().