I, Vietnam

 From 1986 – 1989

Even though ……

 From 1989 – 1992

In March 1989, Vietnam Gov eliminated the internal settlement exchange rate system and carried out
the official exchange rate.

Year 1986 1987 1988 1989 1990 1991 1992

Official 80 368 3000 3900 6300 9767 10720
Exchange
rate
Calculation from General Statistics Office

From the Statistic above, we can see that Vietnam Dong depreciated dramatically and continuously
during 89-92. Due to the policy and the change in official exchange rate, trading was promoted,
especially, export rose and import decreased, contributed to the balance of trade balance.

 From 1993 – 1997

At the end of 1992, due to the interference of the State Bank to the foreign currency market, the
exchange rate gradually stable, which made the foreign investment currency among firms were used,
especially in import – export business.

Also, there was foreign currency from Vietnamese who lived abroad sent to their family in Vietnam
which became a significant supplier of foreign currency, which made the supply of foreign currency
bigger than its demand, resulted in the exchange rate between VND and USD dropped dramatically.

Besides, the management of the agency which exchange foreign currency was unstrict, there was a big
gap between the exchange rate in official market and grey market which led to the problem that some
agencies used the Gov fame to trade foreign currency illegally, and the banks could not buy a significant
amount of foreign currency. As a consequence, the situation limited the ability to control the amount of
foreign currency in domestic country, and increased the transactions in grey market.

The State Bank controlled the difference between ask price and bid price was strict because it made the
exchange rate operated in a way which did not concern with the supply – demand relationship. It also
did not promote the credit institutions and commercial banks operating.

Because of the problems of the uncontrollable floating rate, the GOV changed the exchange rate control
mechanism. The State Bank governed the amplitude fluctuations of the rate and the official rate. The
Gov also published laws about trading foreign currency.

During the late 1992 and early 1993, bc of the interference of the State, the demand – supply
relationship of foreign currency was improved, the USD tended to depreciated.

The demand – supply of exchange rate was stable during 1993 – 1997.
 Year 1993 1994 1995 1996
Official Ex rate 10640 10955 10970 11100

 From 1997 – 1999

Vietnam was affected heavily by the Asia financial crisis. The USD appreciated strongly compared to all
the currency within South East Asia. The State Bank adjusted the rate of Vietnam Dong: Increased the
transaction rate fluctuation to +- 5% and latter to +- 10%, and simultaneously devaluated the Vietnam
Dong price in order to create a rate which was close to the real rate. The new exchange rate policy made
the Vietnam Dong decreased 16% within 1 year, the difference between real rate and nominal rate
narrowed.

Year 1997 1998 1999

Official Ex rate 11175 12985 14004
 From 2000 – 2006

In this period, the EUR became a strong competitor of USD. Vietnam applied the adjustable exchange
rate policy and the rate can be fluctuated between +- 4% . the domestic currency was revaluated higher
than USD from 10-20%

Year 2000 2001 2002 2003 2004 2005 2006

Official ER 14157 14752 15368 15608 15739 15873 16091
 From 2007 – 2011

In 2006, Vietnam became a WTO member, the Gov continued to carry out the ex rate mechanism which
promoted export and controlled import. However, in this period, the USD depreciated compared to to
other foreign currency which complicated the effort to prevent VND from appreciating.

Year 2007 2008 2009 2010 2011

Official ER 15738.3 16719 17490 18921.3 20229

II, China

 1986 – 1990: China applied the devaluation exchange rate mechanism, applied Floating
exchange rate. The NDY was highly devaluated, from 1 USD = 3RMB to 1 USD = 4 RMB
 1991 – 1993: the Floating exchange rate mechanism started to bring back efficiency, the NDY
continued to depreciated, from 1 USD = 4 RMB to 1 USD = 6 RMB
 1994 – 1997: China carried out the policy to heavily devaluate the NDY, from 1 USD = 5.8 RMB to
8.7 RMB
 1998 – 2004: the policy to maintain depreciating NDY continued, the rate was stable at 8.5 NDY
/ USD, with little fluctuation.
 2005: China stated to adjust the rate with the trend to revaluate the NDY. At this time, 1 USD =
8.27 RMB. After that, the State Bank carried out the Floating exchange rate within the
fluctuation of 0.3% compared to the official exchange rate of State Bank.
 2006 – 2009: with the commitment to revaluate the NDY, China continued to appreciated the
NDY. The exchange rate was now 6.8 NDY/USD in 2009.
  2010: first move towards the commitment of flexing the price of NDY. The State Bank created
the new exchange rate at 1 USD = 6.798 NDY.
 2011: NDY continued to appreciate, but the fluctuation was narrow, at about 0.5 – 1 %. The rate
was 6.3 RMB/USD at the end of 2011

In 1991, NDY appreciated 50% which made the price of goods in China rose,