Publication

Little can be done to stop the People’s Bank of China from accumulating foreign exchange reserves and thus steering the yuan exchange rate. And China’s capital controls prevent the US, Japan and the European Central Bank from retaliating; there are simply no significant yuan assets that foreigners are allowed to invest in. The US government has become so frustrated by this situation that Congress is now seriously considering designating China a currency manipulator. Trade sanctions currently under consideration would be illegal under WTO rules and could throw global trade into turmoil.