Exchange Rate Liberalization in the People's Republic of China

The nominal exchange rate anchor is discussed as a macroeconomic policy tool. Mexico and Chile are discussed as examples of countries that used the nominal anchor to try and lower their inflation to world levels. A historical review of the exchange rate policies of the People's Republic of China is provided. The paper concludes that the nominal anchor policy is not currently in use in China. Although the Chinese government has a goal of lower inflation, the exchange rate is not being used for that purpose.