Zhou Qi Ren: Formation characteristics of the market exchange rate Quarrel shaking the world exchange rate, China&#39;s market in a form of. This market is called the China Foreign Exchange Trading Center, based in Shanghai Zhongshan North Road, Bund 15, a former bank site Russo. New York, London, Tokyo foreign exchange market, which is different from the China Foreign Exchange Trade Center is a physical market, relatively easy to observe. Coupled with short history, to know what&#39;s not too much problem. 1994 years ago, China has foreign exchange transactions, but not a unified market. At that time, the demand for dollars renminbi exchange is achieved through two tracks. The first track is planned orbit, that is, settlement by the Government&#39;s official rate. Whether business or personal, with foreign exchange earnings, have to more than 5 yuan against one U.S. dollar the price of the yuan, settlement to the Government. RMB valuation so high, should be enough time, China&#39;s foreign exchange earnings, the government hopes to lower the price acquired all of the RMB exchange. However, such an abacus with a price, that is, who do not want an active foreign exchange. Government low-cost purchase of foreign exchange, as cheap purchase agricultural year, as efforts to reduce the incentive for producers to stimulate. Hygiene, forced to force opinions on the second track. Path roughly as follows: 80 countries from the last century, began to gradually increase the purchase of foreign exchange premiums, and then launched the &quot;foreign exchange retention&quot; system, which allows corporations to stay in a foreign exchange rate (20%) of foreign exchange for personal use, and may put some of the foreign exchange retention , got the &quot;foreign exchange swap centers&quot; to see if no one bid higher than the official exchange rates. Lower than the true market value because of &quot;cheap foreign exchange,&quot; never a shortage of demand is always strong. We offer you scramble, took an unscheduled raised the price of foreign exchange swap. Two-tier foreign exchange came into being: more than 5 yuan foreign exchange premium against one U.S. dollar, the swap that can be 8 yuan, 9 yuan, or 10 yuan against one U.S. dollar! The latter is the market, because who wanted more dollars, do not cry, would not have left the report of the right to fight for approval, it wants to hold the yuan bid rules of the game is to bid high bidder dollars. Tide of reform and opening up a blessing thanks to the foreign exchange market track is gaining strength. By 1993, the eve of China&#39;s first exchange reform, China 80% of total foreign exchange swap market that track, only 20% of the track from the program. China&#39;s first exchange to change drastically the completion of the merger of the two-track exchange rate, but also to spread all over the pricing of foreign exchange swap centers scattered, integrated into a single bid of the foreign exchange market, which is the origin of the China Foreign Exchange Trading Center. Since then, the RMB exchange rate directly to an executive order to end the era of pricing. Today&#39;s exchange rate, foreign exchange trading center in the formation of this market. China Foreign Exchange Trade Center is indeed a market. However, this market is still a number of systems with characteristics of transition economies. I observed a few years and found at least two features worthy of special attention. The first characteristic is more obvious, the China Foreign Exchange Trade Center is a located in the Chinese market only, no branches elsewhere in the world. This feature, different from the world&#39;s major foreign exchange market. World, people not only traded in the United States dollar, can be traded outside the United States dollar, as it can in Europe and abroad, foreign exchange trading in Japan, like the euro or yen. But the yuan&#39;s trading would be limited to China, the Chinese people in China, foreign currency, foreign currency can be traded in China, but foreigners are not traded outside China, the yuan can. The reason for appreciation outside the loud and clear voice, because they had no way to get dollars for yuan! This regard, Hong Kong is an exception. In the world&#39;s fifth largest foreign exchange market, since 2003, is legal to buy some of the renminbi. No exception is very high in Hong Kong so there is no call on the RMB exchange rate, because no matter what the exchange rate maintained that the Hong Kong General can act on the offer expressed in RMB. Another feature is more subtle. China Foreign Exchange Trade Center is a type of market exchange, the implementation of membership. The legal right of all Chinese foreign exchange operations of commercial banks and other financial organizations (including its branch), Bank of China and Foreign Exchange Authority of the examination and approval, can become a member of the China Foreign Exchange Trading Center. Into China&#39;s foreign exchange, whether from trade surplus, foreign direct investment, or so-called &quot;hot money&quot; are the first of these members, &quot;settlement&quot;, and then by the member organizations of the China Foreign Exchange Trade Center that &quot;inter-bank market,&quot; the bidder auctions of foreign exchange positions of their respective holders. Now the world&#39;s attention the &quot;exchange rate&quot; is the China Foreign Exchange Trade Center members, to compete in this market every day the results. In this sense, that the Renminbi exchange rate is supply and demand in the market competition formed cogency. However, the China Foreign Exchange Trading can join in all transactions among members, there is a special super-member. This is the charge of China&#39;s central bank foreign exchange market and foreign exchange authority. Here, like all other members of the same, the central bank is allowed to purchase foreign exchange. With &quot;special super&quot; qualifier, because the central bank is not only the growing of China&#39;s foreign exchange market last buyers, and in fact bought into the majority of China&#39;s foreign exchange. Readers often heard long past 2 trillion, &quot;China&#39;s foreign exchange reserves&quot;, and all foreign exchange purchases by the central bank. To show that members are still members of super special, because today no longer require the compulsory settlement of China, the central bank bought the currency of most of the approach, simply because of its highest! As a government organization, the central bank purchase of foreign exchange entering big hands, this matter to think? In my view, the central bank Admission purchase of foreign exchange, and other government agencies to market the procurement of goods, not essentially different. Of course, in charge of the markets in their procurement activities, referees and players, do have a role in the conflict. However, the good news is transparent foreign exchange trading, foreign exchange transactions in China than in other government agencies in general admission to the market cleaner. The same rules of the game anyway, we submit bids, the central bank central bank may offer another job. There is no super-privilege, the public has never been to this part of the scandal-ridden. The problem is the purchasing power of the central bank purchase of foreign exchange source. We know that the central bank is not a normal business organization, no way to market through the sale of goods and services to generate revenue. Ministry of Finance or the central bank nor the SAC, you can direct to business or personal tax, or through the sale of state assets or rights to form their own purchasing power. The central bank bought trillions of dollars paid by the amazing huge reserves of RMB, and the &quot;base currency&quot; relevant. This is different from any other central bank intervention of government agencies really so special. This is, to our comprehensive understanding of supply and demand in the market to form the RMB exchange rate, crucial. Talk about it next week.