Chinese Currency Controversies

61 Pages Posted: 21 May 2004  

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: May 2004


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.

Keywords: China, exchange rate, monetary policy, Asia

JEL Classification: F31

Suggested Citation

Eichengreen, Barry, Chinese Currency Controversies (May 2004). CEPR Discussion Paper No. 4375. Available at SSRN:

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

United Kingdom

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