Prominent Economists’ Views: China’s Exchange Rate—Fixed or Floating?
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China’s economy has slowed down in the last several years, with annual GDP growth falling from 10.6 percent in 2010 to 6.7 percent in 2016. In February 2016 Zhou Xiaochuan, the governor of the People’s Bank of China (PBOC), announced a new goal of having a “stabilizing yet flexible” exchange rate to replace the previous policy of de facto gradual appreciation against the U.S. dollar. Observers have since become more uncertain of the PBOC’s next step. Economists have argued for years about the exchange rate system China should adopt—a currency board with a fixed exchange rate, a pegged system such as China had before 2005, or a flexible exchange rate, which could range from managed floating to free floating. What do contemporary economists think about the issue of the exchange rate system? What do they think should be the PBOC’s next move? What opinions do they voice about the new role of China’s currency as a component of the International Monetary Fund’s Special Drawing Right? I collect and analyze the views of several leading economists on the benefits and costs for China of various exchange rate policies.