ABSTRACT
China initiated reform of its exchange-rate regime in July of 2005. At that time, the country adopted a system of a ‘managed float, based on market supply and demand but also regulated with reference to a basket of currencies.’ This signified that China was taking a major step in the direction of instituting a genuinely flexible, floating, exchange rate. Since that time, the RMB has appreciated by over 20 percent against the US dollar. In nominal effective terms, it has appreciated by over 15 percent. This appreciation happened most quickly in the years between 2005 and 2008, when the RMB appreciated at an average annual rate of over 6 percent; during the financial crisis, the RMB maintained a fairly stable level against the US dollar.
