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Chinese Currency Controversies


  • Eichengreen, Barry


This Paper reviews the controversy over China’s exchange rate regime. Placing the issue in the context of the literature on exit strategies, it argues that now is the best time for China to exit from its peg. Moving to a managed float would be in the country’s own interest; it would help the Chinese authorities to gain better control of domestic money and credit conditions. The Paper argues that the principal objections to this recommendation – that the country’s banking system is weak, many of its state enterprises are bankrupt, and its capital account is not yet sufficiently open – are unconvincing. Finally it assesses the likely impact on other Asian countries, concluding contrary to the conventional wisdom that these are likely to be minor at best.

Suggested Citation

  • Eichengreen, Barry, 2004. "Chinese Currency Controversies," CEPR Discussion Papers 4375, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4375

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    References listed on IDEAS

    1. Goetzmann, William N. & Jorion, Philippe, 1999. "Re-Emerging Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 1-32, March.
    2. Rogoff, Kenneth, 1990. "Symposium on New Institutions for Developing Country Debt," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 3-6, Winter.
    3. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
    4. Karolyi, G. Andrew & Stulz, Rene M., 2003. "Are financial assets priced locally or globally?," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 16, pages 975-1020 Elsevier.
    5. Michael Dooley & Richard D. Haas & Steven Symansky, 1993. "A Note on Burden Sharing among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 226-232, March.
    6. Edwin J. Elton, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, February.
    7. K. Geert Rouwenhorst, 1999. "Local Return Factors and Turnover in Emerging Stock Markets," Journal of Finance, American Finance Association, vol. 54(4), pages 1439-1464, August.
    8. Giovanni Dell'Ariccia & Jeronimo Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending; A Test," IMF Working Papers 02/181, International Monetary Fund.
    9. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
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    More about this item


    asia; china; exchange rate; monetary policy;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange


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