China Confronts the Mundell-Fleming Trilemma
For the last year or so, the People's Bank of China has stopped intervening daily in the foreign-exchange market. Whatever challenges it faces, the PBOC must stay the course, and convince markets that China really is committed to a floating exchange-rate regime.
BEIJING – After years of intervening to manage the renminbi’s exchange rate, China’s central bank, the People’s Bank of China (PBOC), is under pressure to float the currency. But striking the right balance between loosening its grip on the exchange rate and maintaining monetary stability will not be easy.