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Pegging the Renminbi to a Basket - Facts, Prospects and Consequences

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  • Heikki Oksanen
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    Abstract

    On 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 Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3254.

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    Date of creation: 2010
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    Handle: RePEc:ces:ceswps:_3254

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    Keywords: China; renminbi; yuan; basket peg; foreign exchange rates;

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    1. Jean Pisani-Ferry, 2010. "China and the world economy: a European perspective," Policy Contributions 387, Bruegel.
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    Cited by:
    1. Dai, Meixing, 2011. "Motivations and strategies for a real revaluation of the Yuan," MPRA Paper 30440, University Library of Munich, Germany.

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