The Yuan Effect

Over the past year, wild speculation and furious debate have turned the future of the Chinese currency, the yuan, into the hottest and most polarizing topic in the global economy. Pegged to the U.S. dollar since 1994—meaning that when the value of the greenback rose or fell, so did the yuan's—China's currency had come to embody the industrialized world's fears of a hypercompetitive mainland staging a hostile takeover of global manufacturing. Led by the U.S., critics accused China of clinging to the dollar peg in order to keep the yuan artificially weak, making its exports extra cheap and fostering a worrisome...

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