To maintain its target exchange rate for the yuan, China had to sell yuan and buy dollars and other currencies.

Question

Quizplus · Accepted Answer

To maintain its target exchange rate for the yuan, China had to sell yuan and buy dollars and other currencies. This is because a fixed exchange rate system requires a central bank to intervene in the foreign exchange market to maintain the currency's value relative to a specific benchmark currency. In China's case, the benchmark currency was the US dollar, so it needed to sell yuan and buy dollars to maintain the yuan's value at a fixed exchange rate against the dollar.

To Maintain Its Target Exchange Rate for the Yuan, China