China News Service, Beijing, July 19 (Reporter Xia Bin) Guan Tao, chief global economist of Bank of China Securities and former director of the International Balance of Payments Department of the State Administration of Foreign Exchange, said in an exclusive interview with China News Service in a face-to-face interview with China News Agency. In practice, a managed floating exchange rate system is an arrangement suitable for China's national conditions.

The most prominent manifestation is that we have endured various extreme events since the establishment of the current exchange rate system in 1994.

  On the one hand, the People's Bank of China emphasizes that the RMB exchange rate is determined by the market. On the other hand, China now implements a managed floating exchange rate system.

Guan Tao, Global Chief Economist of Bank of China Securities and former Director of the Balance of Payments Department of the State Administration of Foreign Exchange, accepted an exclusive interview with China News Agency "China Focus".

Photo by China News Agency reporter Jia Tianyong

  Guan Tao said that the broad exchange rate choice actually includes two levels. One level is the institutional arrangement, that is, the fixed exchange rate and the floating exchange rate. There is a managed float, which is called an institutional arrangement, and the system is relatively stable. There is also an exchange rate policy. Under the exchange rate system, there can also be different exchange rate policies.

  Guan Tao further stated that the renminbi can rise and fall, and this two-way fluctuation has become a shock absorber that absorbs internal and external shocks.

Precisely because the exchange rate fluctuates, it helps to release market pressure in a timely manner and avoid the accumulation of expectations.

  When it comes to the reform of the exchange rate mechanism, Guan Tao believes that the direction of market-oriented reform is to allow the market to play an increasing role in the formation of exchange rates.

The exchange rate market reform itself is a trinity. Apart from how the central exchange rate is formed and whether the exchange rate floating range needs to be adjusted or even cancelled, there are also two aspects of developing the foreign exchange market and straightening out the relationship between foreign exchange supply and demand.

  He added that reform is a package of reforms. For example, the establishment of a modern monetary policy framework, ensuring the health of the economic and financial system, the construction of a modern enterprise system, and the transformation of economic development methods will all promote or restrict the reform of the RMB exchange rate formation mechanism.