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China must give up peg on dollar, ex-central bank adviser says

Section: Daily Dispatches

By Bloomberg News
Wednesday, January 20, 2016

A word of warning from a former adviser to the People's Bank of China: Free the yuan from its dollar shackle and "clearly" inform the market of your exchange-rate policy to avert more damaging rounds of depreciation.

"It's meaningless to peg the yuan against the dollar," Li Daokui, currently a professor of Tsinghua University, said in an interview at the World Economic Forum in Davos, Switzerland, on Wednesday. "The world is not in need of another currency that's pegged against the dollar. It needs a relatively stable currency that's pegged against a basket of currencies."

In propping up the yuan, Chinese authorities have burned through more than half a trillion dollars in foreign reserves in the past 12 months, cutting them to $3.3 trillion. The drawdown was almost equivalent to the entire stockpile of Switzerland, the world's fourth-largest holder. Regulators also tightened capital controls, cracking down on illegal money transfers and restricting lenders from conducting some cross-border transactions. ...

... For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-01-20/china-must-give-up-peg...



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