Market-Oriented Reform of the Yuan Exchange Rate: Organizational and Analytical Aspects

Abstract

The article traces the evolution of the market-oriented reform of the exchange rate of the yuan, the national currency of the People's Republic of China. The purpose of the study is to reveal the consistently implemented reform aimed at domestic economic growth on the internationalization of the yuan exchange rate. A hypothesis was formulated according to which, in the conditions of an export-oriented economy, the internationalization of the exchange rate of the national currency without opening financial accounts of the balance of payments is able to remove the limits of economic growth, and thereby allows an adequate response to external and internal negative challenges (global economic crises, pandemic, sanctions, etc.). To test the hypothesis: 1) the specific practical measures are traced that were taken by the People's Bank of China to internationalize the yuan as a tool for attracting external resources for the growth of an export-oriented economy from 1994 to the present; 2) methods of statistical, comparative and step-by-step regression analysis, synthesis, generalization, as well as the logical method were used. The results of the study confirmed the correctness of the formulated hypothesis. Based on them, it is concluded that improving the market-oriented reform of the yuan exchange rate without opening financial accounts of the balance of payments may consist in creating a hidden target zone of the yuan exchange rate together with the reform of the currency system and the mechanism of currency issuance under the influence of the yuan equivalent of foreign exchange reserves. The theoretical significance of the results obtained consists in substantiating the variety of ways of internationalization of the national currency in relatively undeveloped domestic financial markets. The practical significance is connected with the generalization of current measures for further internationalization of the yuan without opening financial accounts of the balance of payments: the abolition of the average parity and the daily floating limit of 2%; the establishment of a hidden target zone for the yuan exchange rate based on the equilibrium exchange rate; the creation of exchange rate equalization funds for operations on the open market; optimization of the structure of reserve assets and increase shares of gold reserves.