Thursday, January 28, 2010
China's Fixed Exchange Rate
China has defended its fixed exchange rate regime here. A fixed exchange rate regime is where a government fixes its currency's value at a particular specified level via market interventions.
China las long been criticised for its exchange rate regime, because it makes Chinese goods more attractive to us Brits and Americans amongst other since the goods are cheaper than perhaps they should be - hence jobs are lost here to China, hence particularly Americans aren't so happy.
On the other hand, goods being cheap means that inflation in the UK and US has been kept low over recent years - if China revalues, expect inflation to jump in the UK and US...