Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
I disagree.  A peg is observed in the exchange rate -- if flat it's being pegged.  Nothing else can produce a flat exchange rate given that their rates observed in other currencies are anything but flat. And the data show that China is currently not using a basket of any kind -- just the US dollar. It appears to have given up on any semblance of either a basket or a float in mid 2008, so they're certainly not walking their talk if they still claim to be pegging to a currency basket.

It costs the Chinese either Yuan (buying power in China) or other currencies (buying power in other places) to prop up the value of the US dollar.  This is a policy subsidy that benefits a narrow exporting class in China, and it hurts those in China who would rather purchase more stuff made in Europe or save their purchasing power in Yuan for later years. (China suffers from high inflation, partly due to buying dollars with Yuan.)  Either the Chinese authorities are ignorant of this, or they must be shifting blame for their policy decisions regarding export-oriented growth onto the US.

by santiago on Fri Nov 6th, 2009 at 09:43:30 PM EST
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