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Sample Fixed Exchange Policy of China Paper

As a result of the fixed exchange policy which China maintained, US politicians worked together to force China to revaluate the Yuan and liberalize the exchange rate system.

In early 2005, for instance, there emerged an aggressive stance from a section of politicians in the United States who threatened to put up penalizing duties of 27.5 percent on imports from China if the Asian giant did not reform its exchange rate, which was reflective of the perceptions in the US.

Succumbing to these pressures, as well as in its own interest, the Chinese government modified its currency policy on 21st July 2005.

It announced that the Yuan’s exchange rate would become “adjustable based on market supply and demand with reference to the exchange rate movements of currencies in a basket” (Ferrington, 2006:64).

The People’s bank of china (PBOC) announced that it had decided to strengthen the Yuan value by 2.1 percent changing the exchange rate of the dollar to the Chinese currency from the long-standing 8.27 to 8.11.

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