China's Currency Regime: The Perceivd Threat to the U.S. Economy

China’s current exchange rate regime is a hybrid of fixed and floating. It was a purely fixed regime from 1994 to 2005, when the yuan was pegged to the U.S. dollar at approximately 8.28 yuan to the dollar. In July 2005, Beijing announced it would revalue the yuan and peg it to a basket of cu rrencies, which among others includes the dollar, the Euro, the Japanese yen, and the Korean won. The weights of each have never been announced. The reforms created what China expert Wayne Morrison calls, “a managed float.” This type of regime is a fusion of a fixed and floating currency. It is similar to a floating regime because market forces determine the direction of the currency’s trend. In China’s case, the yuan is expected to appreciate. However, it is similar to a fixed regime in that Beijing is still acting to reduce how fast the currency rises in value. From July 2005 to February 2010, the yuan appreciated 17.5 percent against the U.S. dollar. Many U.S. policymakers argue that the yuan is still more undervalued than it otherwise would be under a pure flexible exchange rate regime.CHAD SALITAN is earning his Master’s in International Affairs at George Washington University, concentrating on Security and Development. Hailing from Rochester, NY, he is alumnus of the State University of New York at Geneseo, where he studied In-ternational Relations, Political Science, and Economics. Chad is currently an intern at the U.S. Department of State and is explor-ing opportunities in the foreign affairs field.

Miranda Sieg, Former Staff Writer

Miranda Sieg is a second-year Masters Student at the George Washington University Elliott School of International Affairs studying Security, Development and Conflict Resolution. She is primarily focused on education and cross-cultural violence issues in East and Southeast Asia, but has recently developed an interest in post-conflict development and the integration of refugees and at risk migrants. Miranda spent two and a half years studying and working in Japan and traveling extensively in East and Southeast Asia. She currently works for the International Education Program at GW and is a Presidential Management Fellow Finalist and GW UNESCO Fellow.

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