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Convertibility of Renminbi in China
for the degree of Master of Economics at the University of Hong Kong
in July 1995
Introduction of currency convertibility is one of the most cmcial part of a country's
economic reforms, especially for those formerly centrally planned economies. The concept
covers the unrestricted use of a country's currency for international currencies and
allowing it to be freely exchanged for foreign currencies. To talk about convertibility
actually implies how open an economy is. It is unarguably an indispensable component of
the integration process into the world economy. Since 1994, China's currency, renminbi,
has been highly convertible for current account and remains partially convertible for
capital account. This paper reviews the process of China to achieve renminbi7s
convertibility. Since currency convertibility and liberalization of the trade and foreign
exchange systems are actually two sides of one coin, structural reforms on these two
aspects will be discussed extensively. Then a simple model is used to evaluate the prereform
centrally planned system as well as the transitional arrangement of dual exchange
rate system. Finally, we focus on the impacts of the renminbi convertibility to the
macroeconomic side, stressing on the monetary factors and changes in price levels. Capital
account liberalization is considered as the final step to achieve full convertibility and I will
explain how China launches initiatives to attain it.

Contents
Declaration i
Acknowledgements ii
Table of Contents iii
Chapter 1
Introduction 1
Chapter 2
The Concept of Convertibility 5
1. Traditional View of Convertibility 5
2. Modern View of Convertibility 6
3. IMF's Concept of Convertibility 8
4 Implications of Establishing Currency Convertibility 10
4.1 Implications of Current Account Convertibility .11
4.2 Implications of Capital Account Convertibility 15
5. Convertibility and Macroeconomic Stability 18
Chapter 3
Review of China's Trade and Foreign Exchange Reforms 21
1. General Review on Economic Reform. 21
2. Nature of China's Economic Reform 22
3. Pre-reform External Policies 26
4. Economic Consequence and Efficiency 29
5. External Trade Policy Reform 32
5.1 Decentralization of Foreign Trade Authority 34
5.1.1 Export Promotion Strategy 35
5.1.2 Import and Export Licensing 38
5.2 Relaxation of Exchange Control 40
5.2.1 Foreign Exchange Retention System 43
5.2.2 Foreign Exchange Adjustment Centers 45
5.3 Exchange Rate Policy 53
5.3.1 Stage 1. Internal Settlement Rates 54
5.3.2 Stage 2. Dual Exchange Rate System 56
5.3.3 Stage 3. Unification of the foreign Exchange Rates 58
6. Conclusions 64
Chapter 4
Economic Analysis of the Foreign Exchange Reform 67
1. Basic Model for Foreign Exchange System in CPEs 68
2. Modified Model of Dual Exchange Rate System 72
3. Conclusions and Insights 75
Chapter 5
Convertible Renminbi and its Macroeconomic Significance 75
1. Managed Floating Exchange Rate Regimes 80
2. Monetary Policy and Inflation 84
3. Capital Account Liberalization 90
4. Further Reforms for Capital Account Convertibility 96
5. Conclusions 98
Abbreviations 100
Appendices
Appendix 1. Official Renminbi Exchange Rates before Reform. 101
Appendix 2. Dual Renminbi Exchange Rates after Reform 102
Appendix 3. Foreign Trade Figures 1985 - 94本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。