Evolution of RMB Exchange Rate Regime

Since China is becoming an increasingly important player in the world economic scene, its exchange rate policy, among other issues, have attracted the great attention of global financial markets and policymakers. Our paper takes a closer look at the evolution of the Renminbi (RMB) exchange rate regime since 1979, which can be characterized by four phases including 1979-1984, 1985-1993, 1994-June 2005, and July 2005 to date. RMB exchange rate regime transformed from a centrally planned administrative mechanism to a dual track exchange rate system, then to a managed float with a very narrow band — a de facto peg to the U.S. dollar, and eventually to a managed float with reference to a basket of currencies. In addition, the appendix of our paper provides a chronicle of the RMB exchange rate regime reform during the period from 1979 to 2014.