Steadfast reformism or speculative pragmatism? The political economy of China’s exchange-rate reform

Abstract

China’s exchange-rate regime reform policies have fluctuated since the early 1990s, experiencing at least six significant policy changes: 1994 unification, 1998 stabilization, 2005 reform, 2008 stagnation, 2010 relaunch and 2015 ‘8•11’ reform. This policy fluctuation plausibly suggests that China has behaved as a speculative pragmatist without being disciplined by established and consistent values, principles or national interests, particular against the backdrop of the current international power transition. Adopting an integrative Foreign Policy Analysis (FPA) analytical framework that differentiates and bridges International Relations (IR) national interests with FPA policy motivations, this article compares the six policy changes and argues that China has been a steadfast reformer rather than a speculative pragmatist since the early 1990s. Namely, the market-oriented exchange-rate regime reform has consistently reflected China’s national interest since the early 1990s, notwithstanding occasional policy fluctuations that diverge from the national interest. This integrative analysis contributes to transcending the ‘holism failure’ of IR studies by looking into the specific decision-making processes, and escaping from the ‘reductionist gamble’ of FPA studies by examining the long-term tendency and interests behind these apparently inconsistent policies.