In this context, the ability to conduct macroeconomic management is critical for ensuring sound, rapid and sustainable growth, and the effectiveness of monetary policy has also taken on greater importance. At the current stage of development, China needs to employ monetary policy to accommodate four broad objectives, i.e., price stability, growth, full employment and balanced BOP account.
Exchange rate policy has played a role in achieving these macroeconomic objectives. It also has an impact on China’s competitiveness, trade relations and resources allocation. Therefore, improving the managed floating exchange rate regime and gradually enhancing exchange rate flexibility will help make monetary policy more flexible and effective, and strengthen the ability to conduct macroeconomic management. I.