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Facing the new exchange rate environment, economic entities should take the initiative to correct their behavior patterns.

June 26th, 2006, 09:38, Wang Jinshi Financial Times.

FN reporter Huang photography black soil

Editor's Note On July 2, 2005, China began to implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies. In the past 1 1 month, the RMB exchange rate system has achieved an orderly transition and operated smoothly. On the occasion of the first anniversary of RMB exchange rate reform, this newspaper, China People's Bank Nanjing Branch and Jiangsu Finance Association jointly held a symposium on "Financial Innovation and Risk Avoidance under the Background of Exchange Rate Reform". This seminar is also the "Jiangsu Financial Development High-level Forum".

"Opening work. It is intended to promote the regional financial and socio-economic development, and timely turn the research results into decision-making reference for the head office, government departments, financial institutions and enterprises. Publishing the latest theoretical and policy research results in the form of a forum is also a strategy for Theory Weekly to combine theory with practice in a wider scope and better promote the benign interaction between regional economy and finance. Leaders, experts and scholars from State Administration of Foreign Exchange, China Foreign Exchange Trading Center, relevant departments of Jiangsu Provincial Party Committee and Government, Jiangsu Academy of Social Sciences, Jiangsu Banking Regulatory Bureau, commercial banks, relevant universities and enterprises attended the meeting and made wonderful speeches. The seminar was hosted by Dr. Wei, Vice President of Nanjing Branch of China People's Bank.

Create a suitable macro-and micro-economic environment for the exchange rate formation mechanism

Sun China, President of Nanjing Branch of People's Bank of China.

With the promotion of RMB convertibility, various economic entities will face more and more opportunities and exchange rate risks. In this case, all kinds of economic entities should give full play to their subjective initiative, fully raise their risk awareness, learn to use various hedging methods, intensify technological innovation, and strive to improve the ability of exchange rate hedging. The government and relevant departments should also make corresponding adjustments to create a good environment for the real economy.

First, strengthen supporting policies to create a good atmosphere for exchange rate reform.

The experience and lessons of Japan, Germany, South Korea and other countries in the process of economic rise show that it is very important to shift the growth path from external demand to domestic demand in exchange rate reform. According to the situation in Jiangsu, it is necessary to strengthen the coordination of macro policies such as finance, taxation, investment and trade, increase support for the development of domestic demand and service industry, and change the cycle of investment for export service to that of investment for consumption service, so as to create a good economic environment for the reform of exchange rate formation mechanism.

In the future, in view of the imperfect basic social security system, it is suggested to increase public finance expenditure, build a good social security system and gradually release residents' consumption power. We can also consider supporting enterprises to carry out technological transformation through tax policies, reduce costs, increase the added value of export products, promote industrial restructuring, and accelerate the transformation of foreign trade growth mode.

Second, speed up the construction of the foreign exchange market and provide effective channels for various economic entities to avoid risks.

It is necessary to further accelerate the pace of foreign exchange market construction. Allow subjects with different trading purposes to enter the foreign exchange market in order to improve the degree of competition in the foreign exchange market. At the same time, in order to make market participants have the ability of risk management, we should appropriately increase derivatives such as exchange rate options, broaden the channels for economic entities to avoid exchange rate risks, thereby increasing the choice of economic entities, reducing speculation in the expectation of RMB appreciation, and making the market's pricing of RMB value more true and accurate.

Third, guide enterprises to actively adapt to exchange rate changes and appropriately use financial instruments to avoid risks.

Enterprises should further improve their risk awareness, cultivate and introduce relevant professionals, enhance their ability to cope with exchange rate risks and enhance their adaptability to changes in the foreign exchange market. At the same time, enterprises should strengthen cost accounting, control expenses and further expand profit margins. Pay attention to scientific and technological innovation, improve core competitiveness, develop high value-added products, and realize industrial upgrading as soon as possible.

Four, banks should actively develop financial derivatives, improve the risk pricing ability.

Commercial banks should adapt to the situation and requirements of the reform of RMB exchange rate formation mechanism, seize the opportunity of the rapid development of foreign exchange market and the rapid growth of enterprise exchange rate hedging demand, correctly handle the relationship between improving financial services and preventing risks, enhance service awareness, innovate financial products, launch foreign exchange hedging tools to meet different needs, and correspondingly broaden the term setting of forward foreign exchange settlement and sale business.

Attention should be paid to the issues of currency liquidity and exchange rate flexibility.

Song Fuliang, editor-in-chief of Financial Times

On May 3, 2006, the People's Bank of China released the report on the implementation of monetary policy in China in the first quarter of 2006. The goal of exchange rate reform proposed in the report is to "enhance the floating flexibility of RMB exchange rate and maintain the basic stability of RMB exchange rate at a reasonable and balanced level". It is worth noting that the report also clarified the "basic role" of "market supply and demand" in the new system. He also mentioned that "innovative means" should be used to deepen the reform of the foreign exchange system. With regard to "steadily promoting capital account convertibility", such as QDII, these policies are intended to implement effective financial innovation on the premise of avoiding risks.

Recently, the liquidity problem of China's financial system has intensified. Issues such as currency liquidity, exchange rate flexibility, and independence of economic policies have attracted increasing attention from all walks of life. Although the excess liquidity of RMB is caused by the domestic financial structure, the excess liquidity of RMB is closely related to the excess liquidity of USD under the situation that China exchange rate needs to be more flexible. The excessive issuance of RMB caused by huge foreign exchange reserves is one of the root causes of RMB excess liquidity at present.

Looking at the international community, the proliferation of the US dollar can only be imported into quasi-fixed exchange rate countries with the US dollar as the international reserve currency and the exchange rate mainly pegged to the US dollar. Therefore, under the current circumstances, not only external inflation may be imported into China, but also changes in external capital prices and commodity prices will be transmitted to China. In this regard, we should carry out quantitative and qualitative analysis and research, and take effective measures to deal with it properly.

At present, the reform of the exchange rate system is progressing according to the predetermined goal. In accordance with the principles of initiative, controllability and gradualism, we should constantly improve the managed floating exchange rate system and give play to the basic role of market supply and demand in the RMB exchange rate formation mechanism.

At the same time, we should unswervingly promote the reform of state-owned commercial banks, making them the main body of separating government from enterprises and independently taking financial risks; Gradually introduce foreign exchange hedging derivatives and hedging products in China to lay the foundation for financial institutions and enterprises to avoid foreign exchange risks; Relying on the combination of income policy, tax policy, credit policy and exchange rate policy, we will expand domestic demand, reduce the dependence of economic growth on external demand, and achieve balanced development of domestic and foreign economies. Here, I particularly emphasize that we should pay attention to the micro-economic subjects-banks and enterprises' reflection on the exchange rate reform and exchange rate changes, and pay attention to their feedback, which will make the exchange rate formation mechanism have a good micro-foundation.

Actively respond to the dual pressures of RMB appreciation and inflation.

Quan Wang, Deputy Secretary General of Jiangsu Provincial People's Government

Since the reform of RMB exchange rate formation mechanism was implemented in China on July 2, last year, the RMB exchange rate has shown a "gradual" pattern of RMB appreciation in the medium and long term, although there is great uncertainty in short-term changes. In other words, the direction of RMB appreciation is predictable. This leaves a "learning period" or "adaptation period" for foreign trade export enterprises. For foreign trade export enterprises, it is not so much the risk of exchange rate uncertainty as the risk of whether the exchange rate appreciation cost can be digested as scheduled. Therefore, foreign trade export enterprises are required to enhance exchange rate risk awareness, strengthen independent innovation, tap internal potential, adjust product structure and learn to use exchange rate hedging tools during the "learning period" or "adaptation period". Financial institutions should actively develop financial derivatives and tools, strengthen training and consultation for foreign trade export enterprises, and provide quality services for enterprises to hedge exchange rates.

While paying close attention to the exchange rate risk, we should not ignore the risk of inflation. In recent years, the pressure of inflation has been clearly reflected in the prices of assets such as real estate and stocks. There are many reasons that are not fully reflected in the consumer price index (CPI): for example, overcapacity in the processing industry and excessive competition in the market; Major agricultural products such as grain are not completely regulated by the market, and the market supply is sufficient. Especially due to the development of economic internationalization, the domestic commodity market price is more and more influenced by the international commodity market price, and the price linkage effect between domestic market goods and international market goods is increasingly apparent. If commodity prices in the international market do not rise, it is difficult for commodity prices in the domestic market to rise sharply.

Not long ago, the central bank took control measures to raise the benchmark lending rate by 0.27 percentage points. Obviously, the purpose of not raising the deposit interest rate is to promote domestic demand and prevent increasing the pressure of RMB appreciation; The purpose of raising the loan interest rate is to curb the loan demand and control the credit supply. But on the other hand, the widening spread may also increase the lending capacity of financial institutions. Therefore, the measures to raise the benchmark interest rate of loans are of great significance in sending a strong signal that the central bank aims to control the excessive growth of loans. If the global interest rate hike trend develops further, especially in major trading countries such as Europe and America, it will make room for China to raise deposit interest rates under the pressure of RMB appreciation. Tightening monetary policy and raising interest rates will effectively curb the excessive growth of credit and investment and the rise of asset and commodity prices. In this regard, residents, enterprises and financial institutions should have expectations and preparations, and pay close attention to economic and financial trends.

Governor Zhou Xiaochuan pointed out in view of the exchange rate reform: "All kinds of economic entities should actively revise their behavior patterns to further adapt to the increasingly flexible and volatile exchange rate environment." It is conceivable that with the continuous improvement of RMB exchange rate flexibility and marketization, as well as the continuous promotion of RMB convertibility, various economic entities will face unprecedented opportunities and challenges. In another month, it will be the first anniversary of RMB exchange rate reform. At this point, it is of far-reaching significance to hold a symposium on "financial innovation and risk avoidance under the background of exchange rate reform" People from all walks of life at the meeting had in-depth exchanges on how economic micro-subjects can adapt to the changes in the new exchange rate situation, constantly carry out financial innovation, and effectively avoid exchange rate risks. The exchange and collision of various viewpoints have produced many new financial wisdom, deepened and promoted people's understanding of financial innovation and risk aversion under the background of exchange rate reform, and will effectively promote the deepening and development of this reform.

Marketization is the fundamental orientation of foreign exchange reserve system reform.

Zhou Zhongming, director of Jiangsu Banking Regulatory Bureau, believes that according to the "ternary paradox" of Mundell-Fleming model, a country can only give up one thing at most, but not both. As the maker of monetary policy, the People's Bank of China is actually the ultimate and largest foreign exchange demander and supplier. We should maintain a prudent monetary policy and a relatively moderate foreign exchange reserve. The conflict between these two roles forced the People's Bank of China to make a choice.

The People's Bank of China is the macroeconomic management department responsible for monetary policy, and the foreign exchange system should obey and serve the monetary policy. Therefore, the role of the People's Bank of China in foreign exchange management needs to be fundamentally changed to return the supply and demand of foreign exchange to the market and the public. In a word, the current foreign exchange deposits in the People's Bank should be changed into foreign exchange deposits in the People's Bank and banks.

Depositing foreign exchange in the People's Bank of China is another important process of marketization of China's foreign exchange management system. Market mechanism is a decentralized decision-making mechanism, which comprehensively and accurately reflects the preferences of all participants through the fluctuation of market prices. It is hoped that the excessive foreign exchange reserves in the hands of the central bank will be digested through marketization, so that domestic investors can enter the foreign exchange market more conveniently and express diversified preferences. The foreign exchange market should change from administrative centralized decision-making to market-oriented decentralized decision-making, and give full play to the basic role of the market in the exchange rate formation mechanism.

Financial innovation under the background of exchange rate reform

Han Hongmei, director of the Balance of Payments Department of the State Administration of Foreign Exchange, believes that the so-called "financial innovation" refers to an institutional innovation under the existing social and economic background in China. There are already formed foreign exchange markets and foreign exchange products in the world, such as swaps, forwards, options and futures. So in terms of product innovation, we are still in the learning stage; As far as the system is concerned, there are also very formed derivative products and hedging product systems in the world. China's financial innovation should be to enhance the competitiveness of enterprises, banks and various economic entities through market-oriented means.

To realize financial innovation, we must first carry out conceptual innovation. Policymakers should realize the different roles of different trading subjects in the process of market development, constantly improve the market infrastructure and carry out necessary supervision on the market. Enterprises should renew their ideas from the aspect of enterprise cost accounting. Although the proportion of enterprises using forward settlement and sale of foreign exchange to avoid risks is increasing, it still accounts for a very low total transaction volume. Banks need to strengthen innovation in staffing, accounting and technical support. Foreign market players pursue high value-added products, but we can gradually make basic products, cultivate the market, and then gradually move towards high-end products.

Secondly, from the current research of safe, it is necessary to strengthen the role of industry organizations in order to overcome institutional constraints and enhance financial innovation. For the designers and managers of supervision and policies, it is necessary to constantly enhance their supervision ability. At the same time, in product design, we should strengthen the study of market systemic risks to ensure national financial security.

As a government administrative department, SAFE's main responsibility is to provide more adequate and effective policy environment and institutional guarantee for commercial banks and enterprises. We will strive to provide good market development space and supporting policies and measures for the foreign exchange market to launch more new products, and promote the healthy development of China's foreign exchange market.

Continuously enhance adaptability and flexibility to exchange rate changes.

Dr Wei, vice president of Nanjing Branch of China People's Bank, believes that the flexibility and adaptability of economic entities are the basis for effectively implementing macroeconomic policies. Under the strategy of gradual reform, the change of exchange rate formation mechanism and the adaptability of various economic entities are interrelated, mutually restricted and mutually promoted. We should not only pay attention to the changes in the exchange rate itself, but also pay attention to the changes in depth and breadth behind the exchange rate. Over the past year, some obvious changes have taken place in China's economic and financial structure. Financial reform, especially the reform of state-owned commercial banks and the governance structure are undergoing profound changes. The formation mechanism of products and prices in the foreign exchange market is more diversified and market-oriented, and the adaptability of various economic entities to exchange rate reform is gradually enhanced. These changes themselves embody the principles of progressiveness, controllability and initiative of China's exchange rate reform, and reflect the actual situation of China's economy and the overall strategy of opening up.

After the reform of the exchange rate formation mechanism, the pressure brought by the imbalance of international payments has not been fundamentally alleviated, and the adaptability of economic entities needs to be strengthened. This reflects the complexity of economic operation and the particularity of economic structure. It must be noted that the imbalance of international payments is not only a monetary issue and an exchange rate issue, but also requires the efforts of policies, markets and international coordination. In the coming period, it is necessary to reduce the distortions caused by policies, especially tax policies and foreign capital utilization policies, gradually eliminate the unreasonable prosperity of foreign trade and foreign capital utilization, and constantly improve, cultivate and deepen the foreign exchange market. In addition, we should pay attention to the communication of exchange rate reform and its related policies, and create better conditions for market participants to understand policies, understand reforms and adapt to reforms.

Long-term goal of China's exchange rate reform

Pei Chuanzhi, vice president of China Foreign Exchange Trading Center, believes that there are two long-term goals of China's exchange rate reform: one is that the RMB is partially convertible to eventually fully convertible; The other is that the formation mechanism of RMB exchange rate has changed from being based on market supply and demand to being the dominant force. As we all know, market supply and demand determine prices and resource allocation, which is a market law. The power of market supply and demand is the most basic and dominant force in the market. Its imbalance will cause fluctuations, that is, financial crisis or financial storm. Therefore, we should respect the law of market supply and demand and regard market supply and demand as the ultimate leading force of exchange rate. Of course, this does not mean giving up macro-control. Looking around the world today, no country can give up macro-control of its economy, but the way of regulation is different. The less developed and immature the market economy is, the more direct the regulation is; After the market economy matures, it is more regulated by interest rates.

So, what opportunities and challenges will the exchange rate system reform bring to us? The fluctuation of exchange rate will bring risks, which requires us to avoid risks. Under the open market conditions, with the development of market economy, we are increasingly integrated into the international community, so we must learn to avoid and manage risks. In this case, it will force domestic financial institutions and enterprises to have a sense of urgency, speed up the mastery and application of hedging tools, and further open up space for the intermediary business of banks.

Of course, it also brings us challenges. We know that after the exchange rate changes, how to determine the spot exchange rate or the forward exchange rate has already formed an economic theory. But in the exchange rate determination model, the mainstream theory we know now is only one of the main variables, and in reality, the operation of these hedging tools requires cutting-edge talents. Therefore, the first challenge is the innovation of knowledge and talents. The second challenge is institutional innovation. In terms of institutional innovation, on the one hand, the regulatory authorities should have more innovations in the system; On the other hand, commercial banks should be more innovative in their internal systems. The third challenge is the need for more financial hedging instruments. All hedging needs tools. At present, all we can do is forward and swap, and more financial instruments are needed in the next step.

Taking risk control as the guarantee to realize the steady development of banking industry

Guo Ningning, vice president of Jiangsu Branch of China Bank, pointed out that foreign exchange business is the traditional advantage of China Bank, and how to deal with the changes brought about by the exchange reform is the focus of China Bank. After the reform of the exchange rate system, the Bank of China is sensitive to the market demand for product innovation, and pays attention to research and timely provide enterprises and individuals with relevant financial products for foreign exchange hedging, value preservation and appreciation, so as to help enterprises and individuals rationally use financial derivatives to avoid exchange rate and market risks. In 2005, China Bank launched RMB currency swap business in time, becoming the first bank in China qualified to provide inter-bank RMB and foreign currency swap transactions. Bank of China Jiangsu Branch successfully conducted the first RMB currency swap business in China last September. Develop and talk about RMB structured financial products for companies and individuals, and introduce new products to the market to avoid RMB exchange rate risk-subsidizing foreign exchange settlement and sale (NDO) and promoting forward foreign exchange settlement (triangular NDF); Improve the products of international settlement forward settlement and sale of foreign exchange, and provide services such as RMB drafts under export letters of credit, (fake) forward letters of credit, and overseas payment; Research and develop new international settlement products such as "Export Quanyida", "Import Huilida" and "Domestic Comprehensive Factoring", and actively recommend trade financing products to customers.

Of course, since RMB is still a non-convertible currency at present, although there are many international experiences from the perspective of products, in view of the gradual domestic exchange rate reform policy, the effective avoidance of RMB exchange rate and interest rate risks at present, or the wealth management products with complex structures need further examination and approval by the banking supervision department. So overall, the operating space of banks and customers is still very limited.

Risk management and control of banking industry under the new exchange rate system

Yu Zhiqiang, vice president of Nanjing Commercial Bank, believes that in the next few years, the positive, controllable and gradual exchange rate reform policy concept will run through the exchange rate system reform. The acceleration of the reform of exchange rate system poses a severe challenge to the domestic banking industry and puts forward higher requirements for the risk management level of domestic banks. To this end, in view of the requirements of the exchange rate system reform, banks should take the following countermeasures:

1, accelerate the change of ideas and enhance adaptability. Make timely adjustments in marketing, internal control, risk management, assessment and incentives to cope with changes. 2. Strengthen research strength and improve analytical ability. Strengthen the tracking analysis of RMB exchange rate trend and domestic financial market interest rate trend, and provide accurate decision-making basis for risk product pricing. 3. Strengthen the construction of internal control system and improve the risk management system. For the market risk, credit risk and operational risk involved in financial derivatives trading, a complete risk management method and operational process should be established. 4. Strengthen the research on financial derivatives, improve the innovation ability, copy the mature products in the foreign exchange market to the local currency market, and tap profit opportunities from them. 5. Seize market opportunities and vigorously develop personal financial products. 6. Use differential pricing strategy to increase profits and reduce risks. Commercial banks can set prices flexibly according to different customers, different trading methods and different risks, so as to avoid exchange rate risks and improve their own profits. 7. Promote the integration of local and foreign currency transactions. The purpose of hedging exchange rate risk and interest rate risk can be achieved through the combination of different tools in the local and foreign currency markets.

Find a balance between fixed interest rate and floating interest rate

Chen, president of Standard Chartered Bank Nanjing Branch, believes that the interest rate marketization reform is an important part of the financial reform in the Mainland. First, liberalize the money market interest rate and bond market interest rate, and then gradually promote the marketization of deposit and loan interest rates. The central bank will promote the marketization of interest rates according to this idea. Although this once slowed down the risk of promoting interest rate marketization, the coexistence of floating interest rate system in money market and fixed interest rate system in commercial banks also caused some problems.

Take the past year of 2005 as an example. In March 2005, the central bank drastically lowered the excess deposit reserve ratio. Coupled with the macro-control in 2005, the deposits of commercial banks increased rapidly, but the growth rate of loans declined, resulting in excess funds in banks. In the case of excess funds, the interest rate in the completely free floating money market will naturally fall.

According to statistics, after the excess deposit reserve ratio was lowered in March 2005, the inter-bank market interest rate and the 1 repo rate dropped rapidly, and continued to decline after May.

On the other hand, because the deposit interest rate of commercial banks is still a fixed interest rate system, the base after the increase in September 2004 remains unchanged, that is, it remains at the level of 1 year deposit interest rate of 2.25%. The deposit interest rate of commercial banks remains unchanged, and the money market continues to decline. In many times in 2005, the interest rates of major investment instruments in the money market and deposit rates were upside down. For our bank, the deposit-loan spread means profit, and the drop in money market interest rate means loss.

Therefore, recently, the central bank is taking measures to push up the interest rate in the money market and further reform the interest rate marketization in an orderly manner, which has had a positive impact on the development of the financial and capital markets.

Strategic choice of foreign trade enterprises to avoid exchange rate risk

Yu, chairman of Jiangsu Sumeida Group, said in his speech that on the day of the exchange reform last year, the RMB unexpectedly appreciated by 2%, and the foreign exchange account received by our company suddenly shrank by nearly 6.5438+million yuan, which still had a great impact. For foreign trade enterprises accustomed to exchange rate stability, how to avoid exchange rate risks and ensure the realization of vested interests is another test of foreign trade enterprises' management ability under the reality that the uncertainty and flexibility of exchange rate changes are gradually increasing. Therefore, we should make full use of the existing bank hedging tools; Change the trade settlement method and settlement currency; Strengthen management and enhance the enterprise's ability to resist risks; On the basis of seeking policy support and applying for centralized management of foreign exchange funds, some suggestions are put forward:

1. Expect RMB exchange rate to float freely with reference to a basket of currencies as soon as possible, so that enterprises can adapt as soon as possible and take effective measures to prevent exchange rate risks.

2. At present, the types of exchange rate hedging products launched by banks are not rich enough, and their practicability is not strong. It is hoped that financial institutions will provide high-end products such as futures, options and swaps as soon as possible to further enrich and improve financial hedging tools.

3. Exchange rate changes affect all import and export enterprises, which is a "one size fits all" policy. The state should reasonably guide enterprises to optimize the structure of export products and promote the upgrading of industrial structure by reducing the export tax rebate rate and raising interest rates.

The urgency of promoting the reform of foreign exchange system

Professor Wu Xianman, director of the Institute of Information of Jiangsu Academy of Social Sciences, believes that the reform of the foreign exchange system should be stepped up, and its urgency comes from the following aspects:

First, from the point of view of the establishment and perfection of generalized market, the development and perfection of foreign exchange market is very urgent. At present, the development of foreign exchange market lags behind other factor markets. During the Eleventh Five-Year Plan period, the important task of foreign exchange reform is to further promote the reform of the foreign exchange market.

Second, from the perspective of establishing and perfecting the generalized price system, the prices of general goods and services have been liberalized, the market regulation mechanism has basically taken shape, and the factor price formation mechanism is relatively perfect. However, the marketization of exchange rate mechanism is still relatively low, which affects the function of the whole price system. During the Eleventh Five-Year Plan period, to improve the market economy system, we must establish a comprehensive price system, and consolidate the achievements and deepen the promotion on the basis of the current exchange rate formation mechanism.

Third, from the perspective of national economic strength in a broad sense, the urgency of exchange rate system reform is prominent. Since the reform and opening up, China's economic strength has increased and it has become a big reserve country, but at the same time there are many hidden problems. However, the increase of foreign exchange reserves has also provided a powerful condition for us to push forward the reform of exchange rate formation mechanism more and more vigorously.

Strategies to solve the deviation of RMB internal and external value

Professor Pei Ping, deputy dean of the Business School of Nanjing University, suggested that we should not rush to correct the deviation between the internal and external values of RMB, but should make steady progress. In the short term, we should maintain the basic stability of RMB exchange rate at a balanced and reasonable level, and actively take effective measures to alleviate the pressure of RMB external appreciation and internal depreciation, and reduce the deviation of internal and external values. The first is to ease the pressure of RMB external appreciation. Under the pressure of RMB appreciation, to adjust the internal and external balance of the economy, we must start with the total amount and structure. In terms of total amount, the pressure of exchange rate appreciation can be reduced by stimulating total demand or maintaining high growth; Structurally, we can further increase the domestic investment rate, expand consumption and reduce domestic savings by adjusting the tariff level and export tax rebate rate, relaxing the control of capital outflow and the restrictions on residents holding foreign exchange. The second is to prevent hyperinflation. It is required that the monetary policy be foresighted or forward-looking, so as to avoid the deviation of money from the target in the transmission process and appropriately control the growth of money and credit. The third is to enhance the public's psychological preparation for exchange rate changes. When the internal and external pressures are relieved and the public is psychologically prepared, expanding the floating range of exchange rate can temporarily alleviate the deviation between the internal and external values of RMB. The reform of RMB exchange rate formation mechanism is conducive to maintaining the normal fluctuation of RMB exchange rate in the short term, maintaining the basic stability of RMB exchange rate at a reasonable and balanced level, and laying a foundation for reforming and perfecting RMB exchange rate formation mechanism and correcting the deviation between internal and external values of RMB in the long term.

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