Reform of rmb Exchange Rate Regime 4.3 History of RMB Exchange Rate orm Official Rate and Internal Settlement Rate: 1978-1985 994Md200 ed Floating Md2005-AG.20 1953-1984 1986-1993 Phase I(1953-1978) vap markets established since 1986, the rate determined by buyers and sellers, constant depreciation of RMB albeit Official rate kept depreciating (partially due to inflation), Phase(1978-1984) with official adjustment, 5.22 in the end of 1990 Frequent intervention by SAFE on behalf of PBoC on the Reform and opening door policy started in 1978 swap center n intemal settlement rate(2.8 )introduced in 1981 Large difference in the rates: 5.72 vS 8.7 in the end of 1993 Official rate(1.5) published by SAFE, used only for non- Internal settlement rate discontinued in 1985; all rate against USD on January 1st, 1994 at the prevailing swap transactions done at the official rate(2. 8) 1994-Mid2005 RMB Rate: 1994 to 2005 Market-based managed floating system as stated, still with band of 0. 3% either side after 1997(8. 296-8.2771 rong commitment of intervention from PBoc acto peg according hanghai Forex center and interbank Forex market established Retention quota for enterprises, priority list of forex provision and regulated market access abolished Current account convertibility of RMB achieved on December RMB strengthened 4.8% against dollar during 1994 to 1997 China entered WTO on Decllth, 2001, promised opening the §§§看§§§§§2016/11/2 8 4.3 History of RMB Exchange Rate Reform 4-43 Reform of RMB Exchange Rate Regime 4-44 1953－1978: Single Peg and a Basket Peg Official Rate and Internal Settlement Rate: 1978－1985 1986-1993: Dual Rates System 1994-Mid 2005:Market-based Managed Floating Mid 2005-AUG. 2015 (Appreciation) Aug. 2015- 4-45 1953-1984 • Phase I (1953-1978) – officially determined exchange rate , single peg in a strictly planned economy – No foreign debt and FDI, foreign trade controlled by state￾owned foreign trade companies • Phase II (1978-1984) – Reform and opening door policy started in 1978 – An internal settlement rate (2.8) introduced in 1981 – Official rate (1.5) published by SAFE, used only for non￾trade-related transactions – Internal settlement rate discontinued in 1985; all transactions done at the official rate (2.8) 4-46 1986-1993 • Swap markets established since 1986, the rate determined by buyers and sellers, constant depreciation of RMB albeit PBoC’s intervention • Official rate kept depreciating (partially due to inflation), with official adjustment, 5.22 in the end of 1990 • Frequent intervention by SAFE on behalf of PBoC on the swap center • Large difference in the rates: 5.72 vs. 8.7 in the end of 1993 • Official rate and swap market rate integrated as reference rate against USD on January 1st, 1994 at the prevailing swap market rate (8.7) 4-47 1994 - Mid 2005 • Market-based managed floating system as stated, still with strong commitment of intervention from PBoC • Shanghai Forex center and interbank Forex market established • Retention quota for enterprises, priority list of forex provision and regulated market access abolished • Current account convertibility of RMB achieved on December 1st, 1996 • RMB strengthened 4.8% against dollar during 1994 to 1997 from 8.7 to 8.3 • China entered WTO on Dec11th, 2001, promised opening the financial market in 5 years RMB Rate: 1994 to 2005 4-48 8.2 8.3 8.4 8.5 8.6 8.7 8.8 94/1/1 94/7/1 95/1/1 95/7/1 96/1/1 96/7/1 97/1/1 97/7/1 98/1/1 98/7/1 99/1/1 99/7/1 00/1/1 00/7/1 01/1/1 01/7/1 02/1/1 02/7/1 03/1/1 03/7/1 04/1/1 04/7/1 05/1/1 05/7/1 Floating band of 0.3% either side after 1997(8.296-8.277)  de facto peg according to IMF?