“Hong Kong's stock exchange is working on a way to help investors buy stocks listed in yuan, even if they don't own any of the Chinese money, and will toughen measures to reduce market-wide risks.”
China’s place in the world economy is under constant scrutiny because of its fixed exchange rates. The fixed rates frustrate trade partners because they keep China’s currency artificially undervalued. As a result, China is at unfair trading advantage and its economy is booming. Under the Mundell-Fleming economic model, fixed exchange rates will also artificially increase production. While officials “are still determining whether the margin will float in line with volatility or be fixed,” opening yuan-dominated stocks to other currencies may be another step towards floating the exchange rate.
What would happen if China revalued the yuan? The past offers some clues, The Economist, Apr. 24, 2010.
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