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The Nature of China’s Exchange Rate Regime and the Potential Impact on Its Financial System

  • René W. H. van der Linden
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)

Abstract

More than five years have passed since China moved into an exchange rate regime with reference to a basket of some major currencies on 21 July 2005. Since then, the controversies over the costs and benefits of China’s exchange rate policy have intensified. More recently, the rapidly rising US indebtedness and pursuit of its quantitative easing policy, the current Eurozone crisis and China’s role in the global macroeconomic imbalances have reignited the debate about alternative reserve currencies. Since China has emerged as the world’s second largest economy and the biggest exporter, its currency has been severely under-represented in global trade and capital markets. Therefore, in light of the current currency war with a ‘rising dragon and falling eagle’, it seems natural to talk about Renminbi (RMB)1 internationalization and its potential reserve currency role as a rival to the US dollar (USD) and other major currencies.

Keywords

Exchange Rate Monetary Policy Central Bank Exchange Rate Regime Exchange Rate Flexibility 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© René W.H. van der Linden 2011

Authors and Affiliations

  • René W. H. van der Linden

There are no affiliations available

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