China's exchange rate system after WTO accession : Some considerations

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Title: China's exchange rate system after WTO accession : Some considerations
Author: Shen, Jian-Guang
Organization: Bank of Finland
Suomen Pankki
Department / Unit: Institute for Economies in Transition (BOFIT)
Siirtymätalouksien tutkimuslaitos (BOFIT)
Series: BOFIT Online
Series number: 17/2001
Year of publication: 2001
Publication date: 18.12.2001
Pages: 22 s.
Keywords: pääomaliikkeet; sääntely; Kiina; WTO; valuuttapolitiikka; valuuttakurssit; Bofit-kokoelma
Abstract: China's foreign exchange system currently combines a virtual peg to the US dollar with direct capital account controls.With accession to the World Trade Organisation, China's capital control regime can be expected to lose its effectiveness in the face of accelerating liberalisation of trade and investment.While the country may experience in the medium term an increase in nominal and real shocks, the easing of capital controls is an inevitable requisite promoting development of China's domestic financial markets and integration with the global trade system and capital markets.Soft pegs with wide fluctuation bands or similar arrangements that retain certain capital controls could thus be adopted in the interim.Then, as China's financial markets develop and enterprises and banks begin to adhere consistently to market principles, a more flexible foreign exchange regime such as a managed float with relaxed capital controls could be introduced. Key words: China, exchange rate system, WTO accession


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