Abstract
Ever since China adopted its Open Door policy, it has received unparalleled attention from international scholars. In recent years, this has been evident with respect to the exchange rate regime that China has applied. At first, the policy was lauded because it helped China steer the dire waters of the Asian Crisis that occurred in the late 1990s. Even after the world entered the new millennium, the exchange rate regime has been heavily criticized. Most of this criticism came from the USA, since they placed China at the top list of who to blame for the worsening trade deficit, especially referring to the undervalued nature of the Renmimbi (RMB). However, this is just a part of what we address in this paper. In the first part, we will explain the current situation in China. We will see how the Chinese exchange rate regime changed from a dollar peg, to a peg based on the existing basket of currencies.
