China: RMB Exchange Rate Reform and the Managed Float (2005-2015)

1. China launches managed float and ends strict dollar peg

   Jul 21, 2005Labels: PBOC, State Council

   China’s central bank (PBOC), authorized by the State Council, announced a major exchange-rate reform. Starting July 21, 2005, China moved to a managed floating exchange rate (a float guided by policy actions) based on market supply and demand, with reference to a basket of currencies, ending the earlier de facto U.S. dollar peg. The PBOC also introduced a daily “central parity” (midpoint) rate for onshore trading.

   • PBOC 2005
   • CRS Report

2. Initial revaluation sets new central parity at 8.11

   Jul 21, 2005Labels: central parity, USD CNY

   As part of the July 2005 reform, the PBOC adjusted the U.S. dollar–renminbi rate to 8.1100 yuan per dollar and used it as the central parity for the next trading day. This immediate step signaled that the RMB would no longer be held at a fixed rate and that future changes could occur through the daily fixing and allowed trading band.

   • PBOC 2005
   • CRS Report

3. Daily trading band set at ±0.3% around parity

   Jul 21, 2005Labels: daily band, onshore market

   Under the 2005 framework, the onshore RMB spot rate against the U.S. dollar was allowed to move within a narrow daily band of ±0.3% around the central parity set by the PBOC. This design aimed to introduce market pricing while still limiting short-term volatility, consistent with a “managed” rather than fully free float.

   • PBOC 2005
   • Brookings

4. China widens daily USD/RMB band to ±0.5%

   May 21, 2007Labels: PBOC, daily band

   To increase flexibility, the PBOC widened the daily trading range for the RMB against the U.S. dollar to ±0.5% around the midpoint. This change was framed as a step toward a more market-oriented exchange-rate mechanism, while still keeping the core managed-float structure in place.

   • Reuters CNBC
   • Brookings

5. China narrows RMB flexibility during global financial crisis

   Jul 1, 2008Labels: global financial, RMB policy

   As the international financial crisis deepened, China narrowed RMB exchange-rate flexibility and kept the RMB broadly stable rather than devaluing. This marked a pause in the earlier appreciation trend and reflected policy priority on stability during a period of global shock.

   • PBOC 2010 speech
   • PBOC 2015 note

6. RMB appreciation culminates before crisis-era stabilization

   Jul 21, 2008Labels: RMB appreciation, USD CNY

   Over the first phase of the managed float, the RMB appreciated substantially against the U.S. dollar. By July 21, 2008, the dollar–RMB rate had moved from about 8.11 to about 6.83, reflecting a long, policy-guided upward crawl rather than a freely floating market rate.

   • CRS Report
   • PBOC 2010 speech

7. PBOC resumes reform and increases RMB flexibility

   Jun 19, 2010Labels: PBOC, exchange reform

   With economic recovery more established, the PBOC announced it would further reform the RMB exchange-rate regime and enhance flexibility, again emphasizing market supply and demand with reference to a currency basket. This decision signaled a return to gradual movement after the crisis-era stabilization.

   • PBOC 2010
   • PBOC 2010 speech

8. Offshore RMB interbank market begins in Hong Kong

   Jul 1, 2010Labels: Hong Kong, offshore RMB

   Hong Kong became the first place outside mainland China with an offshore RMB interbank market, supporting a separate offshore RMB trading environment. This helped RMB internationalization by expanding where RMB could be held and used, while mainland China maintained tighter controls on the onshore exchange-rate system.

   • HK Gov
   • Wharton

9. China widens daily USD/RMB band to ±1%

   Apr 16, 2012Labels: daily band, onshore market

   After the 2010 restart of reform, the trading band for the RMB against the U.S. dollar in the onshore interbank spot market was widened from ±0.5% to ±1%. This expanded the room for day-to-day movement, but the exchange rate remained guided by the daily central parity and policy intervention as needed.

   • PBOC 2015 note
   • Brookings

10. China widens daily USD/RMB band to ±2%

    Mar 17, 2014Labels: PBOC, daily band

    The PBOC doubled the daily trading range for the RMB against the U.S. dollar to ±2% around the midpoint. Policymakers presented the move as another step toward a more market-oriented exchange-rate mechanism, while still keeping a managed framework anchored by the daily fixing.

    • PBOC 2015 note
    • CNBC

11. PBOC changes central parity to reflect prior close

    Aug 11, 2015Labels: central parity, PBOC

    The PBOC announced reforms to make the daily central parity more market-based by linking it more closely to the previous day’s closing spot rate, while keeping the ±2% band. This shift mattered because the fixing (not just the band) is central to how a managed float works: it influences the whole day’s trading range.

    • PBOC 2015 note
    • IMF Transcript

12. IMF approves RMB for SDR basket inclusion

    Nov 30, 2015Labels: IMF, SDR basket

    The IMF Executive Board approved the RMB as a currency in the Special Drawing Right (SDR) basket, a milestone recognizing its growing international use and China’s financial reforms. The decision set a future effective date, making the SDR outcome a clear endpoint for the 2005–2015 reform decade’s internationalization push.

    • IMF PR
    • Central Banking