The Long-Term Trend of the RMB Exchange Rate in the Context of Internationalization

This paper analyzes and compares more than 100 countries´ purchasing power parity and exchange rate of 2005 with 1993 and 2005 as the benchmark year respectively, based on the data from the International Comparison Program (ICP). The results reveal that: (1) For a developing country, the exchange rate gradually tents toward the purchasing power parity given a period of sustained rapid economic growth. (2) For a developed economy, the long-term equilibrium exchange rate is actually the purchasing power parity. Finally, by using the dynamic purchasing power parity theory for a series of analyzes and demonstrations, in this paper we conclude that appreciation of the RMB will be the long-term trend.