ECB Study Warns on Renminbi Peg

European Union and the United States pushed China for a flexible currency system for a long time. Regardless of Yuan undervaluation question, European Central Bank focuses on the financial risks when RMB pegs to the weaken dollar. From Financial Times :

China’s currency regime, which pegs the renminbi to the dollar, risks damaging its economy and poses long-term risks to financial stability, according to a research paper published by the European Central Bank.

An independent monetary policy geared to domestic objectives would better serve the Chinese economy – but require a flexible exchange rate system, the paper’s authors conclude.

Although the ECB made clear that the research by two of its economists did not necessarily represent its views, the paper marked the latest European criticism of the pegged renminbi exchange rate regime.

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