The Appreciation of RMB And The Reform of RMB Exchange Rate Formation Mechanism

In the recent years,the western countries led by America have kept on demanding the appreciation of RMB, which aroused a heated debate on whether RMB should appreciate,when to appreciate and how much it should appreciate.The Chinese government faced the pressure of American government calmly,which was a unique scene in the international community.On July 21th,2005,the People's Bank of China suddenly announced an appreciation of 2% on RMB,achieving surprising effect.At the same time the reform on RMB formation mechanism attracted more attention.A big step in the systemic reform of RMB exchange rate is to change from dollar pegging to referring to basket of currencies.What effect it will have on RMB exchange rate system still needs to be tested by time.