Chinas Exchange Rate Policy: The Case Against Abandoning the Dollar PEG

This paper critically evaluates the policy literature surrounding Chinas exchange rate regime. It first discusses several popularly raised contentions in relation to the dollar peg employed by China, which in fact are poorly grounded in evidence. The paper concludes by noting that in the longer term moving to a managed float may be in Chinas best interests - but for now the focus needs to be firmly in the area of domestic financial reform.