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Marketization of exchange rate

{}Posted in2023/2/25 18:58:08 | 8Browse

What cashback forex cashbackforexexnessization of forexcashrebate forexrebates Marketization of exchange rate refers to the market mechanism play ForexrebateforExnessg a fundamental role in the process of forming the exchange rate of RMB, with more reference to the supply Forex rebate for Exness demand in the international money market, and flexibly determining the ratio of RMB to various foreign currencies based on market supply and demand If marketization of interest rate is the inevitable response to deepening market economy reform in the domestic money market, marketization of exchange rate is Chinas initiative to participate in the international After the founding of New China, it first adopted the crude growth model of relying on factor inputs, first of all capital factors (investment) to drive the economy, following the reform and opening up, it adopted the export-oriented model of Japan and adopted the "export-oriented" national foreign economic policy, using export demand to make up for the shortage of consumption and domestic demand caused by factor drives. The overall crude growth model was driven by investment and exports. The serious distortion of factor prices encouraged the expansion of high resource input, low economic efficiency projects. If it is understandable to support specific economic development goals with an exchange rate policy that deviates from market supply and demand at the initial stage of economic development, today, when China has become the second largest economy in the world, such a policy is in any case unsustainable The international financial crisis has made our export-oriented policy both impossible (demand constraints) and unattractive (shrinking foreign exchange reserves) In fact, Chinas market-oriented exchange rate reform has already begun In 2012, the central bank expanded the floating range of RMB-USD transactions in the interbank spot foreign exchange market from 5 per cent to 5 per cent. The trading floating range was expanded from 5‰ to 1%, and direct trading of RMB to JPY was introduced in the interbank foreign exchange market Since the exchange rate reform in 2005, the RMB has appreciated against the USD and the real effective exchange rate by more than 30% cumulatively, and the ratio of current account surplus to GDP has fallen from 10% at the peak in 2007 to the current level of less than 3% Significance of exchange rate marketization Exchange rate marketization will make import and export The marketization of the exchange rate will make imports and exports more reflective of Chinas resource endowment and comparative advantage, making Chinas external economic development sustainable; together with the convertibility of the RMB capital account and the overseas investment system for individual investors, it will increase the investment options for residents and significantly reduce the financial risks at the national level Issues to note in the marketization of the exchange rate First, the objective positioning of the role of exchange rate policy The economy of a large country is different from that of a small country, where internal balance is the primary objective and external balance is the secondary objective. Since the international financial crisis, although the exchange rates of some emerging market currencies have experienced ups and downs, compared with the previous situation under the rigid exchange rate mechanism, the ability of the emerging market economies and financial systems to withstand external shocks has increased rather than weakened, and there has not been a large currency crisis, financial crisis or even economic crisis. Therefore, the original nature of the exchange rate should be gradually restored, and the phobia of floating the exchange rate should be overcome, neither setting an artificial and long-term policy goal of maintaining exchange rate stability, nor exaggerating or suppressing the role of the exchange rate in regulating the balance of payments, which is also the threshold that must be crossed for the reform of the RMB exchange rate system. "With the increasing openness of the economy, the link between Chinas economy and finance and the world, and between the RMB exchange rate and the global exchange rate system, the impact of external shocks on the country is increasing, and cross-border capital flows are inevitably affected. The current stage of development of the domestic financial market and the current international monetary system, the RMB as an emerging market currency, is still a risk asset rather than a safe-haven currency This means that not only should we change the policy and system that emphasizes foreign trade and domestic trade, the quantity of investment attraction and the quality of investment attraction, foreign exchange outflow management and foreign exchange inflow management, but also the unilateral thinking and traditional preference for cross-border capital flows should be set up with a comprehensive and correct We should establish a comprehensive and correct risk awareness, maintain the necessary tolerance for the two-way flow of cross-border capital, and not simply equate the momentary increase or decrease of capital inflow or outflow with "hot money" inflow or capital flight, avoiding excessive tension and disorder. Third, coordinate the promotion of the RMB exchange rate and interest rate market and capital account convertibility. In terms of exchange rate and interest rate marketization, there is an interest rate parity mechanism between the foreign exchange market and the money market, and the interest rate differential between domestic and foreign currencies is an important factor affecting the exchange rate. Private outward investment, especially the low level of financial investment, will not only be unable to actively hedge the current account surplus that will continue to exist in China in the near to medium term, but also continue to rely on the central bank to absorb foreign exchange and accumulate foreign exchange reserves, reduce the efficiency of monetary policy, or capital outflows passively "feed on the sky", and will also suppress the supply and demand in the foreign exchange market. Therefore, promoting capital account convertibility and establishing a sound balance of payments self-regulation mechanism with two-way capital flows are intrinsically linked and interdependent with promoting exchange rate marketization.　　
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