Details of the historical process of RMB reform since the reform and opening up!

On December 1, 1948, the People's Bank of China was established and issued a unified currency, the RMB. On January 18, 1949, the People's Bank of China officially announced the RMB exchange rate for the first time in Tianjin. Over the past 40 years and in different periods, the RMB exchange rate arrangement has had different characteristics.

1. RMB exchange rate arrangements before reform and opening up

From the founding of the People’s Republic of China to before reform and opening up, my country’s RMB exchange rate arrangements have generally gone through three stages of development:

1 ． The first stage (1950~1952). Since the RMB does not have a specified gold content, the exchange rate against the currencies of Western countries was not initially determined based on the gold parity of the two currencies, but was calculated based on the "price comparison method". In other words, in the early days of the founding of the People's Republic of China, the RMB exchange rate was based on price levels, which was a relatively market-oriented exchange rate arrangement.

In the early days of the founding of the People's Republic of China, prices in our country continued to rise due to hyperinflation and other factors left over from the Kuomintang rule. For example, the Shanghai wholesale price index was 100 in June 1949, and rose to 2242.93 in March 1950. Due to the price comparison relationship between rising domestic prices and falling foreign prices, in accordance with the aforementioned policy requirements, the exchange rate of my country's RMB against the US dollar was lowered from 1 US dollar = 80 old RMB on January 18, 1949 to 1 on March 13, 1950. US dollar = 42,000 yuan old RMB. In one year and one month, the RMB exchange rate fell 49 times. As for the exchange rate with other foreign currencies, it is the result of indirect calculation based on their exchange rate against the US dollar.

From March 1950 to the end of 1952, as domestic prices changed from rising to falling, and at the same time, as the United States launched a war of aggression against North Korea and rushed to purchase war preparation materials in large quantities, the United States and its allies successively announced a series of In order to impose a "blockade and embargo" on China, our country must lower its foreign exchange rate in order to promote its imports. Therefore, according to the needs of the development of the situation at that time, the focus of my country's exchange rate policy also changed from "promoting exports" to "balancing import and export", and gradually raised the RMB exchange rate. In December 1952, the RMB exchange rate was raised to 1 US dollar = 26,170 old RMB.

During this period, my country’s foreign trade mainly targeted the United States, and its foreign trade was mainly operated by private importers and exporters. The timely adjustment of the RMB exchange rate can regulate import and export trade and ensure the growth of exports.

2． The second stage (1953~1972). From 1953 onwards, domestic prices tended to be generally stable, foreign trade began to be uniformly managed by state-owned companies, and the prices of major products were also included in national plans. The planned economy itself requires a basically stable policy on the exchange rate of the RMB to facilitate internal accounting of enterprises and the preparation and execution of various plans. At the same time, due to the establishment of a fixed exchange rate system centered on the US dollar, the exchange rates between countries have remained relatively stable to a certain extent. In addition, our country has very few direct trade relations and lending relations with Western industrial countries. Therefore, changes in the exchange rates of Western currencies have little impact on our country's RMB exchange rate.

With domestic price levels stabilizing, my country has carried out its first currency reform since the founding of the People's Republic of China. On March 1, 1955, new RMB began to be issued, and the conversion ratio of old and new RMB was 1:10,000. Since the adoption of the new RMB, from 1955 to 1971, the exchange rate of RMB against the US dollar has been 1 US dollar equivalent to 2.4618 new RMB.

On December 18, 1971, the official price of the U.S. dollar against gold announced a depreciation of 7.89%, and the RMB exchange rate was accordingly raised to 1 U.S. dollar = 2.2673 yuan.

During this period, the RMB exchange rate policy adopted a stable policy, that is, based on the original exchange rate, it was set with reference to the exchange rates announced by governments of various countries, and gradually separated from prices.

However, at this time, the price gap between domestic and foreign countries widened, and the cost of imports and exports was very different. Therefore, the foreign trade system adopted the method of import and export sharing profits and losses, and implemented the method of making up for export losses with import profits. The regulatory effect of the RMB exchange rate on imports and exports weakened.

3. The third stage (1973~1978). After March 1973, the Bretton Woods system completely disintegrated, and Western countries generally implemented a floating exchange rate system. In order to avoid the impact of inflation and exchange rate changes in Western countries on our economy, our country has frequently adjusted the exchange rate of the RMB against foreign currencies since 1973 (the exchange rate of the RMB against the US dollar was adjusted 61 times in 1978 alone), and when calculating the RMB exchange rate , adopts the method of pegging a weighted "basket" of currencies. The currencies in the selected "basket" are foreign currencies that account for a large proportion of the denomination currencies of my country's foreign trade, and the changes in the weighted average exchange rates of these currencies are used , as the basis for corresponding adjustment of the RMB exchange rate.

The direct goal of the RMB exchange rate policy during this period is still to maintain the basic stability of the RMB. In response to the continuous occurrence of dollar crises and the continued decline of the exchange rate, the RMB exchange rate has changed more frequently and has shown a tendency of gradual appreciation. In 1972, 1 US dollar = 2.24 yuan; in 1973, 1 US dollar = 2.005 yuan; in 1977, 1 US dollar = 1.755 yuan.

Since the mid-1950s, because our country has been implementing a traditional socialist planned economy, which is self-isolated externally and highly centralized internally, until the early 1980s, the country’s foreign exchange reserves were basically in a state of zero, and foreign trade was in a state of zero. Exports are mainly limited to socialist countries, and the balance of payments is generally balanced. Domestic price levels are also frozen by mandatory plans. Although the RMB exchange rate is seriously overvalued, it has not brought obvious negative effects.

2. RMB exchange rate arrangement after reform

After the reform and opening up, my country's RMB exchange rate arrangement has roughly gone through four stages of development:

1. The first stage (1979~1984). In 1979, my country's foreign trade management system began to reform, and foreign trade was changed from one state-owned foreign trade department to multiple operations. Since my country's prices have always been set by the national plan and have not changed for a long time, the prices of many commodities are low and the price ratio is imbalanced, resulting in a situation of huge price differences between domestic and foreign markets and export losses. This makes the RMB exchange rate unable to take into account both trade and non-trade. Two aspects. In order to strengthen economic accounting and adapt to the needs of the reform of the foreign trade system, the State Council decided to implement two exchange rate systems starting from 1981, that is, to separately formulate an internal settlement price of trade foreign exchange and continue to retain the official price as the non-trade foreign exchange settlement price. This is the so-called "dual exchange rate system" or "dual-track exchange rate system."

In 1980, the official price of RMB was 1 US dollar = 1.5 yuan. From January 1981 to December 1984, my country implemented an internal settlement price for trade foreign exchange, with 1 U.S. dollar of trade foreign exchange = 2.80 yuan; the official price was 1 U.S. dollar of non-trade foreign exchange = 1.50 yuan. The former is mainly applicable to the settlement of import and export trade and trade ancillary expenses; the latter is mainly applicable to the exchange and settlement of non-trade foreign exchange, and still uses the original weighted average calculation method of a basket of currencies.

With the gradual appreciation of the U.S. dollar in the early 1980s, my country correspondingly lowered the announced RMB foreign exchange price to make it close to the internal settlement price of trade foreign exchange. The RMB foreign exchange rate announced at the end of 1984 had been adjusted to 1 US dollar = 2.7963 yuan, which was the same as the internal settlement price of trade foreign exchange.

2． The second stage (1985~1990). Under the RMB dual exchange rate system, foreign trade companies suffer policy losses, which increases the burden of financial subsidies. Moreover, the International Monetary Fund and foreign manufacturers have raised objections to the dual exchange rate. On January 1, 1985, my country canceled the internal settlement price of trade foreign exchange and restored a single exchange rate system, with 1 US dollar = 2.80 yuan.

In fact, in 1986, with the full development of the national foreign exchange adjustment business, a new dual-track system was formed in which a unified official quotation and widely varying market adjustment exchange rates coexisted.

Moreover, in the foreign exchange adjustment markets across the country at that time, the market exchange rate levels were not the same at every point in time. This multiple exchange rate system, in which the official exchange rate and the market exchange rate coexisted, lasted until the end of 1993. During this period, the exchange rate formation mechanism of the foreign exchange adjustment market went through a process from artificial pricing at the beginning of the trial to being determined by market supply and demand.

After entering the mid-1980s, my country's price rise accelerated, while Western countries achieved certain results in controlling inflation. Under this circumstance, our government consciously used exchange rate policy to regulate the economy and foreign trade, and accordingly continued to lower the RMB exchange rate. On August 21, 1995, the RMB exchange rate was lowered to 1 US dollar = 2.90 yuan; on October 3 of the same year, it was lowered again to 1 US dollar = 3.00 yuan; on October 30 of the same year, it was further adjusted to 1 US dollar = 3.20 yuan.

From January 1, 1986, the RMB gave up the practice of being pegged to a basket of currencies and changed to a managed float. The purpose is to make the RMB exchange rate adapt to the requirements of international value and maintain relative stability for a period of time.

On July 5, 1986, the RMB exchange rate was significantly lowered again to 1 US dollar = 3.7036 yuan. On December 16, 1989, the RMB exchange rate dropped sharply again, from 1 US dollar = 3.7221 yuan to 4.7221 yuan that day. On November 17, 1990, the RMB exchange rate dropped sharply again, from 4.7221 yuan previously to 5.2221 yuan that day.

In the more than ten years from the reform and opening up to April 9, 1991, the characteristics of the RMB exchange rate policy are as follows: First, the coexistence of the internal settlement price of trade foreign exchange and the published quotation were implemented separately. The dual exchange rate system, as well as the multiple exchange rate system in which the official exchange rate and the market exchange rate coexist; secondly, the announced official exchange rate of the RMB is adjusted according to market conditions and shows a sharp depreciation trend. This is consistent with the substantial depreciation of the actual domestic value of the RMB during the same period and my country's international balance sheet. The third is that many useful attempts have been made on the adjustment mechanism of the RMB official exchange rate, such as small and gradual adjustments pegged to a basket of currencies and one-time large adjustments. These will set the stage for the future. The foundation has been laid for the implementation of the RMB managed floating exchange rate system; fourth, the market exchange rate mechanism has been gradually improved; fifth, the regulatory role of the market exchange rate has become increasingly important in our country.

3. The third stage (1991~1993). Since April 9, 1991, my country has begun to implement a managed floating operating mechanism for the official exchange rate of the RMB. The state has made timely, moderate, flexible, and up-and-down floating adjustments to the official RMB exchange rate, changing the previous practice of large-scale adjustments to the exchange rate in stages. In fact, the RMB exchange rate implements a multiple exchange rate system in which the announced official exchange rate and the market exchange rate (that is, the foreign exchange adjustment price) coexist.

my country's RMB managed floating exchange rate system mainly refers to the managed floating of the RMB official exchange rate. Its basic feature is that my country's foreign exchange management agency, the State Administration of Foreign Exchange, based on the situation of my country's reform, opening up and development, In particular, external economic activities require that the published official exchange rate of the RMB be adjusted in a timely, appropriate, flexible, up and down manner with reference to changes in the exchange rates of major currencies in the international financial market. In more than two years, the official exchange rate has been slightly lowered dozens of times, but it still cannot keep up with the rising export exchange costs and foreign exchange adjustment prices.

4. The fourth stage (1994~2005). Since January 1, 1994, my country has implemented the unification of RMB exchange rates. On December 31, 1993, the official exchange rate was RMB 5.8 per US dollar; the adjusted market exchange rate was approximately RMB 8.7 per US dollar. From January 1, 1994, these two exchange rates were merged and a single exchange rate was implemented. The exchange rate of RMB against the US dollar was set at 8.70 yuan per US dollar. At the same time, the mandatory plan for foreign exchange receipts and payments was cancelled, foreign exchange retention and surrender was cancelled, a bank foreign exchange settlement and sales system was implemented, foreign currency pricing, settlement and circulation were prohibited within the country, an inter-bank foreign exchange trading market was established, and the exchange rate formation mechanism was reformed.

After this exchange rate unification, my country has established a single, managed floating exchange rate system based on market supply and demand. So far, the exchange rate of RMB against the US dollar has stabilized and has remained around 1 US dollar = 8.3 yuan.

With the deepening of reform and opening up, my country's foreign exchange management system has successively carried out a series of major reforms. Especially after the reform of the foreign exchange system in 1994, our government promised that before 2000, the current account The currency can be exchanged for RMB.

In fact, in 1994, my country began to implement the "conditional" convertibility of the RMB under the current account, and has removed most of the restrictions in the International Monetary Fund regulations, such as discriminatory monetary measures. Or multiple exchange rate arrangements have been completely abolished, and the use of foreign exchange and fund transfers for most current account transactions are no longer restricted.

The "Regulations of the People's Republic of China and Foreign Exchange Administration" which came into effect on April 1, 1996, eliminated a number of exchanges for non-trade and non-operating transactions under the current account that were still retained after 1994. restrictions; in July 1996, the exchange restrictions for private use were eliminated, the scope of foreign exchange supply was expanded, and the standards for foreign exchange supply were raised. Foreign exchange purchases exceeding the standards can be purchased after being reviewed by the State Administration of Foreign Exchange; 1996 On July 1, 2019, my country fully integrated foreign-invested enterprises into the national unified bank foreign exchange settlement and sales system, thus canceling the current account exchange restrictions that remained after the 1994 foreign exchange system reform.

On November 27, 1996, the People's Bank of China officially sent a letter to the International Monetary Fund: China will no longer apply the transitional arrangements stipulated in Article 14, paragraph 2, of the Agreement of the International Monetary Fund, and officially Announced: Starting from December 1, 1996, my country will accept the obligations of Article 8, paragraphs 2, 3 and 4 of the International Monetary Fund Agreement, realize the convertibility of RMB under the current account, and will no longer restrict the use of capital as a currency. For regular international transaction payments and transfers for the purpose of transfer, discriminatory currency arrangements and multiple exchange rate systems will no longer be implemented.

On November 17, 2001, Guo Shuqing, deputy governor of the People's Bank of China and deputy director of the State Administration of Foreign Exchange, pointed out that according to the relevant agreement signed by China and the United States in 1998, China promised to expand the flexibility of the renminbi. Therefore, if China now chooses to peg other currencies or adopt a basket-currency linked exchange rate system, it will not only break its promise, but also retreat. Increasing exchange rate flexibility is a realistic option. At this stage, China will still focus on stabilizing the exchange rate, and at the same time make full use of the 3‰ daily exchange rate floating range to enable the market to gradually adapt to exchange rate fluctuations. In the future, measures will be taken to improve the marketization of the RMB exchange rate generation mechanism, such as effectively utilizing the floating range of exchange rates in the inter-bank market; adjusting banks' management policies for foreign exchange settlement and sales turnover positions; and further improving the foreign exchange settlement system.

3. A new stage of RMB exchange rate arrangements

On July 21, 2005, the People's Bank of China issued [2005] No. 16 - Regarding Improving the Reform of the RMB Exchange Rate Formation Mechanism Announcement of related matters. The main contents are as follows:

(1) Since July 21, 2005, my country has begun to implement a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies. The RMB exchange rate is no longer pegged to a single U.S. dollar, forming a more flexible RMB exchange rate mechanism.

(2) The People's Bank of China announces the closing price of the U.S. dollar and other trading currencies against the RMB in the inter-bank foreign exchange market on that day after the market closes on each working day, which will be used as the middle price of the currency against the RMB on the next working day. .

(3) At 19:00 on July 21, 2005, the transaction price of the U.S. dollar against the RMB was adjusted to 1 U.S. dollar to 8.11 yuan, as the price for transactions between designated foreign exchange banks in the inter-bank foreign exchange market the next day. The designated foreign exchange bank can adjust the listed exchange rate to customers from this point onwards.

(4) At this stage, the daily transaction price of the U.S. dollar against the RMB in the inter-bank foreign exchange market is still floating within a range of three thousandths above or below the central parity rate for U.S. dollar transactions announced by the People's Bank of China. The transaction price fluctuates within a certain range above and below the central parity rate of the currency announced by the People's Bank of China.

(5) The People's Bank of China will adjust the exchange rate floating range in a timely manner based on market development and economic and financial conditions. At the same time, the People's Bank of China is responsible for managing and adjusting the RMB exchange rate based on domestic and international economic and financial situations, market supply and demand, and with reference to changes in the basket currency exchange rate, maintaining the normal floating of the RMB exchange rate, and keeping the RMB exchange rate at a reasonable and balanced level. maintain basic stability, promote the basic balance of international payments, and maintain the stability of the macroeconomic and financial markets. ”

The core of this reform of the RMB exchange rate arrangement is to abandon the peg to the U.S. dollar and instead peg it to a basket of currencies, in order to establish a more flexible RMB that is freely adjustable, autonomously managed, based on market supply and demand. Exchange rate mechanism. Judging from the short-term appreciation of the RMB, this will help alleviate the huge pressure on the international balance of payments. At the same time, it will release the potential appreciation pressure of the RMB and dilute the international conflict between the RMB and the US dollar. The establishment of a new exchange rate mechanism will help promote the market-oriented reform process of RMB exchange rate arrangements and ultimately create asymptotic conditions for RMB convertibility under the capital account.

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