Pegging the Renminbi to a Basket - Facts, Prospects and Consequences
AbstractOn 19 June 2010 the Chinese authorities announced that the renminbi (RMB) was henceforth to be pegged to a currency basket. Yet, it has quite closely followed the USD, though having appreciated by 2.7 % by the time of writing. At the G20 Seoul Summit on 11-12 November 2010, China committed to further reform the RMB exchange rate regime. We discuss here what a genuine basket peg could mean for China, with the view that the weight for the EUR should obviously be significantly increased, the SDR being a strong option for practical implementation. This would also have a positive impact on the EU. China’s currency reform has possible implications for its USD-dominated assets. Their reduction could trigger a further depreciation of the USD. The potentially costly consequences call for new rules for the world financial architecture. China’s expansion will inevitably lead to a diminishing international role for the USD.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3254.
Date of creation: 2010
Date of revision:
China; renminbi; yuan; basket peg; foreign exchange rates;
Find related papers by JEL classification:
- F30 - International Economics - - International Finance - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
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- Jean Pisani-Ferry, 2010. "China and the world economy: a European perspective," Policy Contributions 387, Bruegel.
- Dai, Meixing, 2011.
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30440, University Library of Munich, Germany.
- Meixing Dai, 2011. "Motivations and strategies for a real revaluation of the Yuan," Working Papers of BETA 2011-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
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