On December 10, 2022, the Macro-Finance Salon (No. 184) and the fifth seminar of the “Financial Development as a Boost to the Chinese Path to Modernization” series was held online. Co-hosted by the International Monetary Institute (IMI) of Renmin University of China (RUC) and Department of Monetary Finance, School of Finance, RUC, the seminar was joined by keynote speakers Guan Tao, Global Chief Economist of BOC International and Zhang Liqing, Director of Center for International Finance Studies and professor of School of Finance, Central University of Finance and Economics. The salon was moderated by Wang Fang, Deputy Director of IMI and Associate Dean of School of Finance, RUC.

Guan Tao, Global Chief Economist of BOC International delivered a keynote speech on “Reform of Market-based Exchange Rate and High-quality Development”. He suggested that to promote high-quality economic development, we should deepen reforms to make the exchange rate more market-based, increase RMB exchange rate’s flexibility, and keep the RMB exchange rate generally stable at an adaptive, balanced level. (1) A market-based exchange rate meets the needs for ensuring monetary policy autonomy and better serves the real economy. (2) A market-based exchange rate is integral to following the new development philosophy and fostering a new development paradigm. (3) A market-based exchange rate is essential for adhering to market economy reform and high-standard opening-up. (4) High-quality development needs to be more secure, and a market-based exchange rate would be an important lever to ensure both development and security. (5) A market-based exchange rate ensures that we play an active part in the reform and development of the global governance system and build a community with a shared future. Deepening reforms to liberalize the exchange rate can wean RMB from the over-reliance on key currencies, lower the demand for foreign exchange reserves, and reduce risk exposure.

Zhang Liqing, Director of Center for International Finance Studies and professor of School of Finance, Central University of Finance and Economics noted that a liberalized RMB exchange rate can promote high-quality development through four channels, namely properly allocating foreign exchange as a resource and avoiding external economic imbalance, fostering the new development paradigm of dual circulations and fending off or absorbing external shocks, maintaining monetary policy independence and expanding financial-sector opening-up, and RMB internationalization. In liberalizing RMB exchange rate, it is necessary to steer the reforms in the right direction of greater flexibility and achieving free floating exchange rate in the end. On top of that, we should seize opportunities when China’s economy reopens amid downturns of major economies, so as to accelerate the development of foreign exchange hedge, strengthen communication with the general public, better manage expectations, enhance policy communication and coordination, and further the reforms of market-based RMB exchange rate.