China's Foreign Exchange Market: Research on Problems and Countermeasures

The foreign exchange derivative market plays a vital role in the global economy. As one of the world's largest economies, China has already recognized the significance of establishing a well-regulated foreign exchange market. However, the Chinese foreign exchange market still faces several challenges. There are four main challenges: regional disparities in development, low level of diversification, high market risks, and inadequate regulation. These issues should draw public’s further attention and get resolution. This paper aims to analyze the four problems above in China's foreign exchange derivatives market and propose feasible solutions, including alleviating the imbalance problem, strengthening market diversification, reducing information asymmetry and strengthening the government supervision, which help to address the identified problems. The research findings are also helpful for some market participants and policymakers to understand the shortcomings of China's foreign exchange derivatives market better, and thus designate more rigorous trading strategies and improve the environment for China's foreign exchange derivatives market.