Ｅｖａｌｕａｔｉｎｇ　Ｃｈｉｎａ’ｓ　Ｅｘｃｈａｎｇｅ　Ｒａｔｅ　Ｒｅｇｉｍｅ

Ｃｈａｒｌｉｅ　Ｘｉａｏ　Ｆｅｎｇ

The U.S. in the last couple of yearshas been up in arms about China's ex-change rate regime. Congress has activelycalled for the Treasury to name China as acurrency manipulator, which would grantit the legal standing to impose countervail-ing duties. In fact there is already legisla-tion that has been proposed by Senators Schumer and Graham for a 27.5% tariff onChinese goods, unless that is China allowsits currency to appreciate. However beforeanalyzing the validity of U.S. concernsabout the exchange rate regime, a clearunder standing of the benefits that the fixed RMB has provided is crucial. Here I thinkthere are two important pieces worth men-tioning: first are the low prices offered to American consumers in terms of Chinesemanu factured goods, and second is theastoundingly cheap credit and capital thatthe PBC is providing for U.S. economy aswhole.