China About To End Dollar-Peg

China About To End Dollar-Peg

Having received several comments and questions from readers about the future of China’s monetary policy, which “pegs” the price of the renminbi to the U.S. dollar, that usually serves as a good indicator that this is a topic worthy of a more detailed discussion.

The general attitude I have encountered (which is obviously fuelled by how the mainstream media chooses to report this issue) is that China’s government is likely to retain the dollar-peg either because a) that has been its policy throughout the last decade; or b) that China is somehow “trapped” into maintaining the “peg”. I firmly believe the exact opposite: that China’s government is very close to abandoning the dollar-peg, and (in fact) has made a multitude of preparations to do so.
It is entirely moot (at this point) to debate whether China “should” dump the dollar-peg. The facts are obvious: China must dump the peg, and both China and the rest of the world will benefit enormously from it doing so.

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