What is the dual-track exchange rate system?

The dual-track exchange rate system is a system of rules governing foreign exchange exports. What was produced in the reform of foreign trade in 1979, of course, was finally implemented in 1981. The final implementation is to set the trade foreign exchange internal settlement price, and continue to save the official quoted price as the non-trade foreign exchange settlement price. This is actually the so-called dual-track exchange rate system. The meaning in detail is as follows:

The dual-track exchange rate system means that the export earnings of enterprises are divided into two parts. One part is turned over to the country at a lower official exchange rate for otaku, and the remaining part is sold at the adjusted market exchange rate or can import profitable products based on market supply and demand signals.

The pros and cons of the dual-track exchange rate system

The implementation of the dual-track exchange rate system will break the single form of foreign exchange prices and constitute a relatively sensitive dual-regulation system for foreign exchange prices. The implementation of this system is an inevitable result of the initial stage of my country’s socialism, and it is possible to stop macro-control on exchange rates. Use market mechanisms and value laws to stop foreign exchange market regulation. The dual-track exchange rate system can invigorate the foreign exchange capital market, adjust the supply and demand of foreign exchange, and also help foreign trade companies adjust their export costs and mobilize the enthusiasm of exporting to earn foreign exchange.

The disadvantage of the dual-track exchange rate system is that it widens the gap between the current exchange rate of money and the adjustment price, which has a great impact on the impact of the current money going home, and the spread anchor it brings will inevitably be mixed with foreign exchange speculation. activity. Of course, this requires the relevant foreign exchange departments to stop strengthening the management, guidance, monitoring and defense of the foreign exchange market.

PART1: The advantages of the dual-track exchange rate system:

  1. The dual-track system allows micro-individuals to have sufficient time to adjust their behavior during the economic transition, so as to adapt themselves to the way of obtaining resources at market prices. The change of the system itself is a kind of “destructive construction”, and the drastic system change may also lead to only the destruction but not the construction.
  2. However, since the dual-track system is for the majority of vested interest groups and then creates a space for them to profit through the price gap, it also prevents them from losing their original interests due to reforms.
  3. The planning track ensures the development of the existing productivity of the state-owned sector and the implementation of the original output. However, in the market track, competition was carried out by introducing both the non-state sector and the state sector, which not only increased production, but then gradually formed a competitive market structure. New competitive factors were introduced without destroying the foundation of the original state-owned sector.

PART2: Disadvantages of the dual-track exchange rate system:

The dual-track system has been in operation for a long time so that people are accustomed to the “dual-track system thinking.” Therefore, the “aftermath” of the dual-track system still exists, which in turn leads to the distortion of resource allocation.

PART3: The impact of the dual-track exchange rate system:

  1. The implementation of the dual-track exchange rate system broke the single foreign exchange price system and formed a dual-regulation system with more flexible foreign exchange prices than before. Because of the implementation of this system, my country’s socialism has formed the initial stage of development.
  2. It can carry out macro-control on the exchange rate and can also use market mechanisms or the law of value to regulate the foreign exchange market. The dual-track exchange rate system can use the market of live foreign exchange funds to regulate the supply and demand of foreign exchange.

In addition, the factors of the dual-track exchange rate fluctuation include currency or exchange rate, emergencies, international speculative shocks, the release of economic data and even the remarks of key government officials. These will have more or less impact on it, so you need to spend more energy on this aspect to understand or learn.