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April 06, 2010


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If China could be freely floating exchange rates, financial markets could be as large current account surplus in the value of Chinese exchange rate. Herein lies the main reason for China's growing reserves in foreign currency.


Chinese exporters have mobilized to lobby their local governments and central government agencies to keep the RMB from appreciating, or at least rising too quickly. In periods when the RMB did appreciate, exporters were given other benefits -- access to cheap credit and expanded domestic consumption -- as compensation.

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