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Why do they need exchange controls, having the biggest surplus already? Exchange controls seem to be used only by countries struggling with deficits.
by anovikov 9y ago
Why do they need exchange controls, having the biggest surplus already? Exchange controls seem to be used only by countries struggling with deficits.
- ftlio 9y agoMy understanding was that between debt purchasing and exchange controls, China can keep the yuan cheap and demand for their exports high. I say 'was' because it's been a while since I tried to grok China's economy.
- chaostheory 9y agoftlio is right, but another reason is Taiwan. Someone can correct me if things have changed - a lot of Taiwanese businnesses have strong links to the mainland in the form of manufacturing facilities, and so on. China encourages these links with one big stipulation: these Taiwanese businesses cannot transfer their funds out of China. Why? China considers Taiwan to be a renegade province that it would like back just like Macau and HK. It will do almost anything to make that a reality i.e. influencing elections, tempting and pressuring the business sector, etc... It's such an emotional issue that I feel even a costly invasion would be on the table if there was enough provocation from pro-independence factions in Taiwan