Starting from the main problems at present, the difficulty of development lies in the lack of capital account convertibility and the inability to copy the market development model of developed countries.
The system determines the relative stability that China’s foreign exchange market reform must maintain.
The reform of foreign exchange settlement and sale system directly determines the reform of foreign exchange market.
We should not only consider how to reform the foreign exchange market under the current foreign exchange management system, but also consider the actual process of capital account convertibility.
At present, the fundamental crux of the ownership of state-owned foreign exchange banks lies in the unclear property rights, which leads to the imperfect incentive and restraint mechanism for managers and does not fit in with the establishment of the dealer system.
The FUNDAMENTAL WAY TO SOLVE THIS PROBLEM IS TO FURTHER CARRY OUT THE SHAREHOLDING SYSTEM REFORM OF STATE-OWNED BANKS, PUSH STATE-OWNED BANKS INTO THE STOCK MARKET AT APPROPRIATE TIME, gradually REDUCE the proportion of STATE-OWNED shares, and clarify the ownership of STATE-OWNED banks.
On the basis of clear property rights, a reasonable governance structure should be established through legal rules, so that everyone can effectively constrain and motivate managers.
These banks are commercial banks that truly operate in accordance with the requirements of the market economy and can effectively play the role of dealers in the foreign exchange market.
2. Gradually Relax Control over foreign exchange inventory The current management of the turnover ratio quota has obvious traces of the planned economy and the period of foreign exchange shortage.
With the improvement of the opening degree, the scope of foreign exchange is more and more large, the country’s foreign exchange fund management is more and more difficult;
On the other hand, China has gradually changed the situation of foreign exchange shortage in the past.
Under the new situation, the settlement of foreign exchange turnover ratio quota management gradually lost the original significance;
More importantly, this regulation hurts the competitiveness of China’s banking sector and does not meet the requirements of establishing a dealer system.
Therefore, it is imperative to reform foreign exchange bank’s foreign exchange inventory management.
In the further reform of the foreign exchange system, it may be considered to gradually relax the floating limit of foreign exchange turnover in settlement, so that foreign exchange banks have more freedom to choose the size of foreign exchange assets.
At the same time, the current daily liquidation system will be reformed and the mandatory liquidation period will be relaxed so that foreign exchange banks can arrange their foreign exchange assets over a longer period of time.
When conditions are right, China should eventually give up and ensure that foreign exchange banks have full operational autonomy in preparation for the establishment of a dealer system.
3. Promote competition among foreign exchange banks and prevent monopoly Under the condition of incomplete capital flow, most transactions in China’s foreign exchange market are concentrated in a few state-owned banks such as Bank of China, which leads to the possibility of monopoly.
Partly because of history, partly because of regulation.
This should change in order to establish an effective dealer system.
We will break the preferential policies of the Bank of China and other state-owned foreign exchange banks, treat foreign exchange banks and non-bank financial institutions as equals, and enable banks to compete freely on an equal basis.
At the same time, we can consider conditionally opening the capital account to increase the elasticity of foreign exchange supply and increase the difficulty of monopoly.
4. The combination of the RMB mechanism and the development of the foreign exchange market In a sense, the operation of the foreign exchange market is the process of exchange rate generation.
Therefore, the formation mechanism of RMB exchange rate is the core issue of the operation of foreign exchange market.
The flexible exchange rate mechanism can regulate the supply and demand of foreign exchange and provide signals for macro-control.
One of the contents of the reform of the foreign exchange management system in 1994 was to implement a managed floating foreign exchange system based on market supply and demand.
The formation of exchange rate reflects the supply and demand of foreign exchange market to a certain extent, but the formation mechanism of exchange rate is not perfect.
The central bank is responsible for balancing the supply and demand of foreign exchange on a daily basis because of strict controls on the settlement and sale of foreign exchange by domestic enterprises.
At present, the yuan’s exchange rate is pegged.
In recent years, there has been a large change, while the RMB exchange rate has a small floating range, forming a de facto official exchange rate inconsistent with the supply and demand of foreign exchange.
We will improve the RMB exchange rate formation mechanism and make it more market-based.
Expand the range of exchange rates in the interbank market, for example by allowing exchange rates to fluctuate up or down by one to two hundred points a day.
Adjust the management policies of the Bank according to the turnover of foreign exchange settlement and sales.
In the near term, consider adjusting the lower limit of banks’ foreign exchange settlement and bank sales weekly levels to zero, allowing banks to hold zero;
In the medium term, we should gradually expand the ceiling on banks’ foreign exchange positions and eventually remove the restrictions on banks’ foreign exchange positions.
Reform the system, such as expanding the scope of foreign exchange earnings that enterprises are allowed to retain under the current account, raising the limit on foreign exchange that can be retained, and extending the grace period for settlement of foreign exchange.
5. Improve the foreign exchange intervention mechanism of the central bank As the macro-regulator of the foreign exchange market, the central bank should not intervene in the market excessively or too frequently, and let the market participants freely decide to trade.
In view of China’s relatively sufficient international reserves and strong resistance to domestic foreign exchange speculation risks, the central bank should relax the restrictions on foreign exchange quotas carried forward by designated foreign exchange banks, expand the scope of free foreign exchange transactions of banks, so that they can truly become the main body of the foreign exchange trading market and play their role in the foreign exchange market as a buffer and regulator.
This has important implications for the healthy development of the foreign exchange market.
Experience from abroad, the central bank usually take some indirect intervention, namely if the purchase of foreign exchange in the foreign exchange market, selling their currencies, can sell short-term bonds in the bond market, with local currency recycling, in order to make local currency liquidity is not due to the operation of the foreign exchange market to expand, in order to effectively intervene in currency markets, China should draw lessons from foreign experience, set up a corresponding RMB,
In line with the open operation of the foreign exchange market, we will increase the buffer space for foreign exchange intervention.
The New Year will be the market holiday, the Fed is about to start trimming.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
