ABSTRACT
This chapter discusses the PPP and interest rate parity of the RMB exchange rate. During the period of RMB’s accelerated appreciation against the US dollar, great changes have taken place in the economic and financial situations of China and the US. Since the beginning of 2008, due to the impact of the global financial crisis caused by the US subprime mortgage crisis, real economic growth slowed down, and the overall inflation level began to decline. It is worth noting that when the appreciation of RMB against the US dollar fell briefly from the beginning of 2009 to the middle of 2010, the difference between the appreciation of the RMB against the US dollar and the inflation rate of China and the US returned to a basically equal position. The emergence of a new pattern of international parity relations indicates that China is still facing severe challenges from internal and external imbalances.
