Research on the Change Trend of RMB Real Effective Exchange Rate and on the Strategies of International Exchange Rate Game

Utilizing the method of geometrically weighted averages to design the nominal effective exchange rate of RMB index and real effective exchange rate index to measure international competitiveness of China's trade and commodities, the paper systematically studies the impacts of the differences and development trends of the two on China's macroeconomic variables. The result indicates that, during the 14 years from 1990 to August 2003 in succession, the nominal effective exchange rate of RMB devalues nearly 40 base points, but the real effective exchange rate of RMB appreciates by 3. 59%. So if we base our judgment on the basic principle of the exchange rate theory, the arrangement of exchange rate of RMB in the past 14 years has led to the drop of China's international competitiveness in export commodities, and the viewpoint of other countries attacking China's exchange rate policy seems lacking theoretical foundation. However, if the trade balance is regarded as the standard to judge equilibrium exchange rate, there really exists pressure for RMB to appreciate. The paper holds that, against the background of financial globalization, the exchange rate has, in essence, become an important mechanism to realize the reallocation of the global wealth among countries. We must combine domestic economic growth, trade balance, foreign exchange reserve and variation of the prices of other countries to deal with exchange rate problem synthetically. Perspective exchange rate system arrangement and management tactics of the foreign exchange reserves must submit to China's long-term goal and whole interests of social development.