Roadmap to Yuan Float

In his latest book The Game of Exchange Rates, Guan Tao, a senior researcher at the CF40 Forum, pointed out that in order to increase the credibility of the promised market-based reform of the renminbi exchange rate, it is possible to announce a schedule and a road map toward a cleaner floating exchange rate , If it is announced that the RMB exchange rate will float freely (or float cleanly) by 2020, of which there will be a managed float without prior announcement of a floating range, that is, the central parity of the exchange rate will actually become a market-traded fixed exchange rate and be canceled Float interval, and then to free float.

The reason for choosing 2020 is that the Third Plenary Session of the 18th CPC Central Committee proposed in 2020 that decisive results should be achieved in important areas and in the reform of key links. By then, the decisive role of the market in allocating resources may be basically established. However, the exchange rate, as a basic factor price, will inevitably require market-oriented pricing.

The reason for the implementation of a managed floating without the prior announcement of a floating range mainly takes into account: First, it is not of much significance to further expand the floating range of exchange rates. Second, it is necessary to preserve the government's power to smooth the exchange rate fluctuations and to stabilize market expectations while maintaining the transition from free float to free float. Third, it helps the central bank to get rid of the bondage of the floating range of the exchange rate and enhance the autonomy of the exchange rate control. In particular, it is better able to cope with the possible violent shocks that may arise in the initial floating-market. Fourthly, it helps to achieve a seamless connection of the exchange rate system and reduce the market impact of the exchange rate reform.

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