RMB Appreciation Impact on Chinese Economy By Wang Changsheng

Wang Changsheng

Abstract:

During the first half of 2005, China’s foreign trade surplus saw a spectacular increase and the foreignexchange reserve grew by 50%. This caused an enormous problem in mac roeconomic management: the seriousimbalance of international payments. In an effort to alleviate this, on July 21, 2005, China implemented a managed floating exchange rate regime based on market supply and demand in reference to a basket of currencies, and increased the exchange rate of the RMB against the US dollar by 2% to 8.11 yuan to 1 US dollar. Currently, it still floats within a band of 0.3% on the previous day’s closing exchange rate and the trading price of non-US dollar currency against the RMB on the inter-bank foreign exchange market.