Analysis of RMB Exchange Rate System Under the Open Economy

There has been a marked tendency of financial globalization since 1980's. Financial crisis emerges now and then partly because of the international capital circulation and the exchange rate floating. There exists a close relationship among the financial crisis, circulation of the international capital and the arrangement of exchange rate. So it has become a theoretical and practical problem about the choice of exchange rate system to the governments in many countries. The present exchange rate system in China is a single, managed and floating one based on the supply and demand in the foreign exchange market. It is fixed and managed but not floating in essence. Faced with the gradual opening of finance and capital account after entering WTO, it will meet great challenges. This paper aims to, based on the Mundel-Fleming Model, reveal the defects of the present exchange rate system and make valuable suggestions on the policy as to the marketalization of RMB exchange rate system under the condition of capital account opening.