Return of the peg

In a series of statements at the end of July, the People’s Bank (PBC) laid out a comprehensive position on the role of the renminbi in China’s broader policy framework. The five articles from Vice Governor Hu Xiaolian discuss the value of a flexible exchange rate in assisting rebalancing, preventing protectionism and controlling inflation, and of using a currency basket as an anchor. They are thoughtful and well-argued. Perhaps most remarkable though is how little resemblance there is to how policy actually operates.