China’s currency conundrum

The decision by China to revalue its currency by 2.1% and introduce a currency basket to determine future exchange rate moves is an important step in the evolution of the country's monetary policy and international economic relations.

China's currency has been pegged to the dollar since 1994. This exchange rate greatly curtailed the autonomy of monetary policy and was becoming a source of growing trade tension with the United States. In April, the Senate passed a resolution threatening to impose