Oct
29

Chinese Currency Controls

By setting the value of the Renminbi unfairly low, Chinese exports are made artificially cheap, while (American) imports are artificially expensive. Normally, this would lead to a large increase in the money supply which would drive up domestic prices and negate the unfairly low exchange rate. However, by forcing banks to buy trillions of very low-yielding Renminbi bonds, and altering bank reserve ratios, China’s currency manipulation has no expiration date.

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