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Opinion

China must resist US pressure to keep yuan stable

Beijing should defend monetary policy sovereignty and stick to exchange rate liberalization

| China

The United States is reportedly pushing China to agree to keep the value of the yuan stable, as part of a deal to end the trade war between the world's two largest economies. It is a demand that China, as its leaders discuss economic policy at the National People's Congress, must think twice about before accepting.

The yuan was undoubtedly undervalued for many years, including through a peg to the U.S. dollar that was established in 1998. An undervalued yuan was an important contributing factor to the trade surplus that China has run consistently since 1993, when its annual per capita income stood at just $400. In other words, even when China was still a very poor country, it was exporting capital to the rest of the world, especially the U.S.

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