While the dollar peg has been immensely beneficial to China’s development, it has not been without cost. While it helped create millions of badly needed export jobs for Chinese workers, it also robbed those workers and their companies of the full value of their labors by underpricing their products. And to maintain it, the Chinese central bank not only had to let the supply of yuan grow to inflationary levels, but it also wound up with $650 billion in dollar reserves that are now likely to decline in value.
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