policy—An overview of some key issues 人民币汇率政策

1Preliminary—toberevisedinlightofconferencepapersanddiscussantscomments.October10,2007China’sExchangeRatePolicy:AnOverviewofSomeKeyIssues*MorrisGoldsteinandNicholasLardySeniorFellowsPetersonInstituteforInternationalEconomicsPreparedfortheConferenceonChina’sExchangeRatePolicyPetersonInstituteforInternationalEconomicsOctober19,2007*WeareindebtedtoDougDowsonandGiwonJeongforexcellentresearchassistance.2I.IntroductionMorethantwoyearshavepassedsinceChinaannouncedanumberofchangestoitsforeignexchangeregimeonJuly21,2005.Duringthisperiod,thedebateontheprosandconsofChina’sexchangeratepolicy,whichhadbeguninearnestseveralyearsearlier,intensified.Inthispaper,weseektoconveytheflavorofthatongoingdebatebyidentifyinganddiscussingseveralkeyissues.Thepaperisorganizedasfollows.ThissectionsimplysummarizesdevelopmentssincetheregimechangeinJuly2005.SectionIIthendiscussesfourkeychallengesfacingtheChineseauthoritiesinlightoftheincreasinglyundervaluedexchangerateandtheacceleratingbuildupofforeignexchangereserves,namely:maintainingagradualpaceofcurrencyreformwhiletryingtousemonetarypolicyasaneffectiveinstrumentofmacroeconomicmanagement;reducingexcessiverelianceonexternaldemandtosustaineconomicgrowth;preventingthedefenseofthepresentcurrencyregimefromhandicappingundulyeffortstostrengthenandtransformthebanksintotrulycommercialentities;andcontainingtheriskofprotectionismabroadinresponsetotheemergenceofChina’sverylargeglobalcurrentaccountsurplus.Finally,SectionIIIoffersabriefscorecardontheleadingoptionsforChina’sexchangeratepolicygoingforward,contrastingthefeaturesofa“staythecourse”policywiththatofabolder“threestage”approachthatseekstoreducemorerapidlythecurrentundervaluationoftherenminbi.RecentdevelopmentsChina’snewcurrencyregimeendedthefixednominalexchangeratevisavistheUSdollar,whichtheauthoritiesadoptedatthetimeoftheAsianfinancialcrisis.1Theofficialbilateralrateappreciated2.1percent,movingtheratefrom8.28to8.11renminbitothedollar.BySeptember2007therenminbi:dollarbilateralratestoodat7.53,1ManyanalysesassertincorrectlythatChinaadoptedafixedexchangeratein1994.OnJanuary1,1994theauthoritieseliminatedtheirdualexchangeratesystembyraisingtheofficialexchangeratetothethenprevailingmarketrateof8.7.However,theauthoritiesthencontinuallyadjustedtheofficialrateuntilitappreciatedto8.28inOctober1997.ThatremainedtheofficialrateuntilJuly21,2005.3reflectingacumulativenominalbilateralappreciationagainsttheUSdollarof9percent.2Onarealtradeweightedbasis,therenminbiappreciatedsignificantlyless,only3.1percentaccordingtoJPMorgan.3China’sglobalcurrentaccountsurplushasexpandedsubstantiallyoverrecentyears.Itstoodat$68.7billion(3.6percentofGDP)in2004,butroseto$160.8billionin2005(7.2percentofGDP)andthen$250billion(9.5percentofGDP)in2006(NationalBureauofStatisticsofChina2007,95;StateAdministrationofForeignExchangeBalanceofPaymentsAnalysisSmallGroup2007,8).4By2006China’sabsolutecurrentaccountsurpluswas,byawidemargin,thelargestofanycountryintheworld.BasedondataontradeingoodsthroughAugust,weestimatethatChina’scurrentaccountsurplusin2007willreach$400–$420billion,12percentormoreofestimated2007GDP.AsurplusofthismagnituderelativetoGDP“wouldbeunprecedentedforacountryofChina’ssizeandstageofdevelopment”(McGregor2007).ThebuildupofofficialholdingsofforeignexchangereserveshasacceleratedsinceJuly2005.5Inthe12monthperiodsthroughJune2005andJune2006,reservesroseby$240billionand$230billion,respectively.Butinthe12monthsthroughJune2007,reservesroseby$391billion,aboutthree-fifthsmorethanintheprevioustwo2Therateofrenminbiappreciationrelativetothedollarhasnotbeenuniformoverthisperiod.Ifonetakestheannualizedone-monthchange,therateofappreciationhasvariedfromlessthan2percent(evengoingslightlynegativeatonepointin2006)tomorethan10percentmorerecently(Anderson2007c).3SincethedollarpeakinFebruary2002,therenminbihasactuallydepreciatedonarealeffectivebasisbybetween2and8percent,accordingtomeasuresofrealeffectiveexchangeratespublishedbyJPMorgan,Citigroup,andtheBankforInternationalSettlements.4Again,ifonegoesbackto2001,theexpansionofChina’sglobalcurrent-accountsurplusismuchlarger,asitstoodatonly1percentatthattime.5Increasesinofficialholdingsofforeignexchangereservesareadownwardbiasedestimateofthemagnitudeofofficialinterventionintheforeignexchangemarketfortworeasons.First,throughtheendof2006thecentralgovernmenttransferred$66.4billioninofficialforeignexchangereservesfromtheStateAdministrationofForeignExchange(SAFE)totheCentralHuijinInvestmentCompany(Kroeber2007).Huijinhasusedthefundstorecapitalizefourbanksandfourinsurancecompanies.Second,SAFEhasengagedinswaptransactionswithstate-ownedcommercialbanksthathaveremovedlargeamountsofforeignexchangefromitsbalancesheet.4twelvemonthperiods.AttheendofJune2007,totalreservesreached$1,332.6billion(People’sBankofChina2007).6Itisimportanttonotethattherelativeimportanceofthecurrentandcapitalaccountsurplusesascontributorstothereservebuilduphaschangeddramatically.In2004,thecapitalaccountsurpluswasmorethanhalfagainaslargeasthecurrentaccountsurplusandthusaccountedformostofther