China's Exchange-Rate Challenge
Whatever happens to the renminbi in 2023, the People's Bank of China would do well to maintain its policy of benign neglect, allowing the exchange rate to act as an automatic stabilizer, while treating capital controls as the last resort. In short, the government should focus on growth and let the market take care of the renminbi.
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BEIJING – The renminbi’s value used to feature heavily in debates about global imbalances. While outsiders considered it to be undervalued and urged appreciation, the People’s Bank of China (PBOC) insisted on maintaining the currency’s de facto peg to the US dollar. In recent years, however, China’s concerns that its currency would grow too strong have been replaced by fears of a sharp depreciation.