Portsmouth Business School

Thesis summary

There has been wide criticism of Chinese exchange rate policy by its main export countries. The rapidly increasing trade surplus places upward pressure on the Chinese currency. Everybody is waiting for the day that China opens its financial markets and moves to a flexible exchange rate regime, as it promised after becoming a member of the World Trade Organisation and wondering what will happen on that day.

My research will mainly focus on the exchange rate of Chinese currency RMB, extending to the financial markets and economic trends in China. The purpose of my research is to forecast the future of RMB. I will build a model to analyse whether the outstanding inflation will push this big country to the edge of economic crisis or not.

For years, the Chinese government used highly centralised authority to ensure that developments followed their wishes. However, the rapid growth of the Chinese stock market reveals the fact in some part, the central government has lost control of the economy. Or perhaps they have allowed these developments on purpose. Often in China, the reason behind the fact is more political rather than economic.