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China'S Exchange Rate System Reform

Author

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  • PAUL S. L. YIP

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore)

Abstract

This paper first documents the rationales behind the transitional exchange rate system reform adopted by China on 21 July 2005. It then outlines the theory behind the medium- and long-term exchange rate arrangements that could be adopted. Thereafter, the paper provides recommendations on supplementary packages that could increase the chance of a successful reform, and increase China's immunity and resilience against financial crises in the future. Finally, the paper discusses the market and economic developments after the transitional reform, and highlights that failure to check the stock market bubble and rampant property inflation could turn the initial success of the reform to an eventual failure and bring disasters to China in the longer future.

Suggested Citation

  • Paul S. L. Yip, 2007. "China'S Exchange Rate System Reform," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 52(03), pages 363-402.
    • Handle: RePEc:wsi:serxxx:v:52:y:2007:i:03:n:s0217590807002774
    DOI: 10.1142/S0217590807002774
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    References listed on IDEAS

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    1. Eichengreen, Barry, 2004. "Chinese Currency Controversies," CEPR Discussion Papers 4375, C.E.P.R. Discussion Papers.
    2. Cheung, Yin-Wong & Chinn, Menzie D. & Fujii, Eiji, 2006. "The Chinese economies in global context: The integration process and its determinants," Journal of the Japanese and International Economies, Elsevier, vol. 20(1), pages 128-153, March.
    3. Frankel, Jeffrey, 2004. "On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adustment under a Flexible Rate," Working Paper Series rwp04-037, Harvard University, John F. Kennedy School of Government.
    4. Jeffrey Frankel, 2005. "On the renminbi," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(03), pages 16-21, October.
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