Regional Trading Agreements
Historial Exchange Rate Regime of Asian Countries
 
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  Untitled Document
China
  The currency of People's Republic of China is renminbi. Upon its establishment, the renminbi was fixed to the U.S. Dollar, with periodical adjustment according to fluctuations in U.S. Dollar.

From early 1970s, China began to list an Effective Rate, which was later pegged to a trade-weighted basket of 15 currencies, for foreign exchange transactions. The former Official Rate since became inoperative. (IMF 1985, p.373)

With its implementation of the openning policy, China created in early 1980s a multiple rate structure, which contained a different exchange rate for trade-related foreign transaction. This structure was abolished 5 years later with the Effective Rate governing all trade. Later, the Effective Rate was placed on a controlled float based developments in the balance of payments and in costs and exchange rates of China's major competitors. Witnessing the development of foreign exchange market and increase in foreign exchange in China, China also created a Foreign Exchange Swap Rate for foreign investment corporations and Chinese enterprises under the foreign exchange retention regime.

In the 1990s, the China authorities worked towards putting the exchange rate regime on more market-oriented basis. Renminbi were firstly allowed to adjust frequently based on the previous indicators. Since 1994, China has been maintaing a controlled float foreign exchange regime under which the Effective Rate was replaced by the prevailing swap market rate.

The State Administration for Exchange Control (SAEC), under direct control of the People's Bank of China (PBC), administers all phases of exchange control. The Bank of China (BOC) implements the foreign exchange plan and is the principal foreign exchange bank of the People's Republic of China. From the second half of 1980s on, authorized banks and institutions can also handle designated foreign exchange transactions with the approval of SAEC. (WCY 1988-1989, p.425)

Sources of reference include:
1. World Currency Yearbook. (WCY)
2. IMF Annual Report on Exchange Arrangement and Exchange Restriction. (IMF)
   
 
Date
Changes to the exchange rate regime
Yuan per U.S. Dollar
1 March 1955Under a draconic currency reform, 10,000 Jen Min Piao became equal to one new Yuan and a fixed Official Rate against the U.S. Dollar was established. (WCY 1984, p.171) 2.460 
1969The Chinese currency was renamed the Renminbi, divided into 10 Tsjao and 100 Fyng. The old name, "Yuan", continued to be use. (WCY 1984, p.171)   
15 August 1971With the floating of the U.S. Dollar, the Renminbi began to appreciate against the American unit. (WCY 1984, p.171)  
23 December 1971Following the devaluation of the U.S. Dollar, Peking announced that the Renminbi's exchange value against the Hong Kong Dollar and Pound Sterling would remain unchanged, and that all trade transactions would be channeled via these two units. With the Renminbi's theoretical gold content unaltered, a new Official rate resulted. (WCY 1984, p.171) 2.267 
April 1972Peking began to list an Effective Rate for the Renminbi against Greenback. (WCY 1984, p.171)  
20 February 1973Following the devaluation of the American Dollar, the Official Rate was realigned. Subsequently, the currency's Effective Rate was realigned periodically. (WCY 1984, p.171) 2.040 
19 August 1974The Effective Rate was pegged to a trade-weighted basket of 15 currencies, the composition of which was undisclosed, and was fixed almost daily against that basket. (WCY 1986-1987, p.417)   
31 December 1974The listed rate since would be the Effective Rate.  1.840 
31 December 1975 1.970 
31 December 1976 1.880 
31 December 1977 1.730 
31 December 1978 1.580 
31 December 1979 1.500 
5 January 1980The State Council issued a decree prohibiting the use of foreign exchange for making payments within China. (IMF 1981, p.111)  
1 April 1980Foreign Exchange Certificates, or Waihui, equal in value to the Renminbi at Effective Rate, were put into circulation for use by nonresidents only. Issued in exchange for hard currency, the could be used for paying hotel bills, transportation fares and for purchases at the Friendship Stores. (WCY 1986-1987, p.417)  
31 December 1980 1.530 
1 January 1981A multiple rate structure for the Renminbi was created with the introduction of a Foreign Trade Rate divided into two categories.

For internal settlements under the foreign exchange allotment quota, the rate is RMB¥2.80 per U.S. Dollar. (WCY 1984, p.171) This rate was formed by adding to the Effective Rate an " equalization price" for balancing export and import profits and losses, and applied to all national enterprises and corporations engaged in trade, as well as to receipts and expenditures in foreing exchange for trade-related transactions in invisibles, such as shipping and insurance. (IMF 1981, p.107)

An experimental trading system for foreign exchange has been established by the Bank of China in a few areas, such as Beijing, Guangdong, Hefei, Shanghai, and Tianjin. National enterprises holding foreign exchange earned through the system of retention quotas are permitted to sell this foreign exchange to other naional enterprises that have a quota for spending foreign exchange. (IMF 1982, p.120) For dealings under the foreign exchange retention scheme, the Bank of China acts as a broker, charging 0.1%-0.3%, resulting in a rate of RMB¥2.803-RMB¥2.808 per Greenback. (WCY 1984, p.171)

The Effective Rate was applicable to all other transactions. (WCY 1984, p.173) While the Official Rate was inoperative. (WCY 1984, p.175) 

 
31 December 1981The Foreign Trade Rate was since fixed at 2.80.  1.750 
31 December 1982 1.930 
31 December 1983 2.800 
1 January 1985The internal settlement rate was abolished and all trade was governed by the Effective Rate. A foreign exchange retention quota also exists for a portion of export proceeds. (WCY 1986-1987, p.417)   
20 November 1985Authorization was granted for Chinese residents to hold foreing exchange and open foreing exchange accounts and to deposit and withdraw funds in foreign exchange. (IMF 1986, p.171)  
31 December 1985 3.200 
1 January 1986The trade-weighted basket of currencies was abandoned and the Effective Rate was placed on a controlled float based on developments in the balance of payments and in costs and exchange rates of China's major competitors. (WCY 1990-1993, p.416)  
13 June 1986Shanghai International Trust and Investment Corporation was authorized to handle exchange business. (IMF 1987, p.154)  
5 July 1986Since then, the rate of Renminbi against U.S. remained unchanged until 12-15-1989. 3.720 
November 1986A Foreign Exchange Swap Rate was created, based on rates virtually agreed on between buyers and sellers and available at over 100 foreign exchange adjustment centers to foreign investment corporations and at first to Chinese enterprises in the four Special Economic Zones (Shantou, Shenzhen, Xiamen, znd Zhuhai, IMF 1988, p.148) but expanded in 1988 to all domestic entities authorized to retain foreign exchange earnings. (WCY 1988-1989, p.421)   
31 December 1986The Foreign Exchange Swap Rate was 5.20. 3.720 
31 December 1987The Foreign Exchange Swap Rate was 5.90. 3.720 
1988Early this year, all domestic entities which are allowed to retain foreign exchange earnings were granted permission to trade in the adjustment centers, and by Octorber 1988, 80 adjustment centers were established. Initially, a relatively small volume of transactions took place inthese markets, but the volume has increased substantially since access to the centers was expanded. (IMF 1989, p.100)  
31 December 1988The Foreign Exchange Swap Rate was 6.60.  3.720 
1 February 1989Regulations were issued governing the use of foreign exchange obtained in foreign exchange adjustment centers. Imports of inputs for the agricultural sector, textile, and for technologically advance and light industries were given priority. Purchases of foreign exchange for a wide range of consumer products were prohibited. (IMF 1990, p.104)  
1 March 1989The SEAC issued regulations governing domestic sales in foreing currency by foreign investment corporations. Such corporations are permitted to sell in China for foreing exchange provided that the sales involve purchases under the Government's annual import plan, sales in Special Economic Zones and other promotional areas, and sales of import substitues. (IMF 1990, p.104)   
15 December 1989The Renminbi was depreciated 21.2%. (IMF 1990, p.97) 4.720 
31 December 1989The Foreign Exchange Swap Rate was 5.40. 3.720 
17 November 1990The Renminbi was cut 9.6%. (WCY 1990-1993, p.416) 5.220 
31 December 1990The Foreign Exchange Swap Rate was 5.70. 5.220 
9 April 1991The management of the exchange rate was altered to a procedure under which the rate would be adjusted frequently in light of certain indicators including development in international exchange markets, relative price performance, and trends in export production costs. (IMF 1992, p.109) 5.263 
11 September 1991New regulations governing the use of official foreign exchange were introduced. Priority for using foreign exchange would be given to imports of agricultural inputs, interest and amortization payments and remittances, and imports of key construction projects and technology. The next priority level would include raw materials used for industrial production, certain spare parts, educational materials, and medicines. Items for which the use of official foreign exchange is strictly prohibited would include cigarettes, wine, clothes, shoes, small household appliances, soft drinks, and film. (IMF 1992, p.109)  
1 October 1991Specialized banks other than the BOC and foreign banks that are engaged in foreign exchange business in Zhejiang and Jiangsu began to sell foreign exchange from export and service receipts directly to local branches of the PBC; these banks were allowed to purchase foreign exchange directly from the PBC to finance imports. The State Administration for Exchange Control would manage this part of the exchange reserves under the authorization of the PBC. (IMF 1992, p.109)  
December 1991Individual residents can buy and sell foreign exchange through authorized banks at rates established in the centers in conformity with the exchange control regulations. (IMF 1992, p.102)  
31 December 1991The Foreign Exchange Swap Rate was 5.90. 5.420 
April 1992Revised guidlines were issued specifying the priority uses of foreign exchange in foreing exchange adjustment centers for goods not covered by import licenses. Imports of inputs for the agricultural sector and central and local construction projects, and advanced equipment and technology, grain, and goods that meet daily needs are given priority. (IMF 1993, p.111)  
31 January 1993The Foreign Exchange Swap Rate was 7.50. 5.750 
1 July 1993The exchange rate at which the state sold 30% of foreign exchange purchased from exporters to certain enterprises was changed from the Effective Rate to the prevailing swap market exchange rate. (IMF 1994, p.115)  
31 December 1993The Foreign Exchange Swap Rate was 8.70. 5.800 
1 January 1994The Effective Exchange Rate and the swap market rate were unified at the prevailing swap market rate. (IMF 1995, p.114)

The PBC would announce a reference rate for the renminbi against the U.S. Dollar, the Hong Kong Dollar, and the Japanese Yen based on the weighted average price of foreign exchange transactions during the previouss day's trading. Daily movement of the exchange rate of the renminbi against the U.S. Dollar is limited ot 0.3% on either side of the reference rate as announced by the PBC. The buying and selling rates of the renminbi against the Hong Kong Dollar and the Japanese Yen may not deviate more than 1% on either side of the reference rate; in the case of other currencies, the deviations should not exceed 0.5% on either side of their respective reference rates. (IMF 1997, p.196)

Issuance of export retention quotas ceased except those for outstanding contracts. (IMF 1995, p.114) In addition, Foreign Exchange Certificates (FEC) ceased to be issued and those in circulation would be withdrawn gradually. (WCY 1990-1993, p.416) 

 
1 April 1994The China Foreign Exchange Trade System (CFETS) in Shanghai (an integrated electronic system for interbank foreign exchange trading) came into operation. 22 cities were linked to this system by the end of 1994. (IMF 1995, p.114)  
31 December 1994 8.446 
31 December 1995 8.318 
1 July 1996Foreign-funded banks were allowed to sell foreing exchange for bona fide transactions and become designated foreing exchange banks. (IMF 1997, p.203)  
1 April 199712 branches of the PBC began to operate forward purchases and sales of renminbi against underlying transactions on a trial basis. (IMF 1998, p.218)  
1 April 1999The longest maturity of forward purchase and sale of foreign exchange was extended to 6 from 4 months. (IMF 2000, p.218)  
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