The RMB Exchange Rate: Past, Current, and Future (20161122)

Over the past two decades, China's robust economic performance has propelled it to the world stage. At the same time, the world has increasingly scrutinized China's economic policies and activities. One of the hotly contested issues is China's foreign exchange rate policy. China's current reform and modernization policies to convert its centrally planned economy towards a market-driven one could hardly draw on experiences of other countries.

This book provides a succinct and up-to-date account of China's exchange rate policy including the currency undervaluation debate and the internationalization of its currency. It begins with a brief history of the modern China's foreign exchange rate policy. In particular, it highlights the three Chinese policy characteristics; namely, independence, controllability and practicability, and graduality. This prologue helps to interpret China's policy on its currency, the renminbi (RMB); including its recent initiatives to promote the international use of its currency.

The book covers the basic theoretical and empirical issues that are relevant for determining the equilibrium value of the RMB exchange rate and, hence, its degree of misalignment. Then it evaluates the controversy surrounding the RMB valuation debate, and highlights the sensitivity of empirical estimates of the degree of misalignment to alternative presumptions.

The book also examines the timely issues related to China's recent efforts in promoting the use of its currency in the global financial market. After describing the background of China's recent efforts to internationalize the RMB, the book a) discusses the main promotional policies, including the recent Qianhai project and Shanghai Free Trade Zone initiative, b) evaluates the current status of the offshore RMB market, the level of international use of the RMB and the admission to the SDR basket, and c) assesses the future prospects of the RMB to be a global currency.

Readership: Academics, policy-makers, professionals, undergraduate and graduate students, interested in China's exchange rate policy and internationalization of its currency.

b>Yin-Wong Cheung is the Hung Hing Ying Chair Professor of International Economics, Department of Economics and Finance, City University of Hong Kong. Concurrently, Cheung is the Professor Emeritus of the Economics Department at the University of California, Santa Cruz, and a Chair Professor of the Shandong University. He obtained his Bachelor, Master, and PhD degrees, respectively, from the University of Hong Kong, the University of Essex, and the University of Pennsylvania. His areas of research include econometrics, applied econometrics, exchange rate dynamics, asset pricing, output fluctuation, and economic issues of Asian Economies.

Kenneth K Chow obtained his Bachelor and M Phil Degrees in Economics from the Chinese University of Hong Kong, and Master of Statistics from the University of Hong Kong. He is an Assistant Manager of the Hong Kong Institute for Monetary Research (HKIMR), which is a research arm of the Hong Kong Monetary Authority (HKMA). He is currently conducting macroeconomic research relating to Hong Kong capital flows, financial stability of Hong Kong, the RMB internationalization, and the Chinese monetary policy.

Fengming Qin obtained her bachelor and master degrees in economics from Shandong University, and Ph.D. from Xiamen University of P R China. Currently she is the Professor of International Economics, in Department of Finance, Shandong University. Her major research interests are international trade and finance, comparative financial system, and regional economic and finance integration.