China central bank made a move to end the Chinese currency yuan’s peg with the U.S. dollar. It is perceived to be in country’s long term interest. The People’s Bank of China gave a statement that ending yuan’s peg with the U.S. dollar is a move toward reforming the country’s foreign exchange structure.
The Vice Governor of People’s Bank of China, Hu Xiaolian, published a statement in the bank’s official website for ending yuan’s peg. Xiaolian also served as the Director of State Administration of Foreign Exchange which directly reports to the POBC. “Given the impossible trinity of achieving monetary policy independence, fixed exchange rate and free capital flow in an open economy, a managed floating exchange rate regime will help enhance the proactiveness and capability of macroeconomic management and the effectiveness of monetary policy, curb inflation and asset bubbles and contain macroeconomic risks.” Vice Governor stated on central bank’s official site.
Many believe that China must not change its current exchange rate regime, even if it does not allow independence and flexibility in the country’s monetary policy.
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