HBR :: China's Exchange Rate Policy: What's Really Going On



China's Exchange Rate Policy: What's Really Going On - The Conversation - Harvard Business Review
"You don't need complex models to predict that the renminbi will remain undervalued for a long time. Whereas an equilibrium exchange rate must eventually lead to a balance in international payments, the data show that between 2000 and 2007, China's share of global manufacturing output soared from 5.7% to 11.4%, and it accumulated foreign exchange reserve of nearly 2.4 trillion dollars. Those are the world's largest reserves in absolute terms; in relative terms, they're astonishing. They account for 50% of China's GDP, 12% of US GDP, and 30% of the world's reserves today. China knows it must do something radical to rectify the imbalance and a tightly managed float against a basket of foreign currencies isn't the solution."

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