Chapter 12: The great wall of the Chinese renminbi (1994-2005)
12. The great wall of the Chinese renminbi (1994–2005) Evidence of currency manipulation has become increasingly obvious during the 2003–05 period. The leading case in point is China. Morris Goldstein (2006, p. 145) Some advisors have prescribed the ‘shock therapy’ to Russia and Eastern European countries, but later on this was described as ‘shock with no therapy’. We should be cautious to oﬀer the same prescription again, so as not to have credibility jeopardized. China will only consider to take the gradualist reform approach that wins the trust of the masses of the Chinese people, rather than a ‘shock’, not to mention that the United States has not taken the lead to use ‘shock’ to adjust its imbalances. Zhou Xiaochuan (2006, p. 2) The exchange rate policy of the People’s Republic of China was not the subject of close attention by the international community until the beginning of the third millennium, when it became clear that the extraordinary and sustained growth performance of China was having major repercussions on the world economy, global payments imbalances and exchange rate relationships among key currencies. In fact, until the 1970s China was seen as the gigantic but poor developing country it was, with an annual per capita income of $200 in 1978 (see Bergsten et al. 2006, p. 5). It was also a communist country that had gone through a period of severe political and social instability during the ‘cultural revolution’ of 1966–69 (with devastating implications for the domestic...
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