China's capability to control its exchange rate

Abstract

This paper discusses the Chinese monetary authority's capability to control the exchange rate of the Renminbi (RMB) by reviewing the key features of China's currency exchange regime. It highlights the fact that this regime not only allows the monetary authority to affect the range of exchange rate fluctuation through open market operations, but also enables it to directly influence the crucial elements of demand and supply in the foreign exchange market. In this light, we examine the recent measures taken by the authority to ease appreciation pressures on the RMB since the mid-2003.©2004 Elsevier Inc. All rights reserved.