Manipulating a currency takes a lot of money. They will not be able to keep it up indefinitely unless they start inflating the money supply. That will not be passable for the general populace, and thus they will have to go off the peg when that happens.
The best scenario is a slow unwinding which happens gradually and lets both the chinese and the american economies to adjust slowly.
Creating a trade war on the other hand would make it all happen at once, meaning that the chinese exporters and the american consumers both must adjust ALL AT ONCE. This during a big fall in global trade. This will work .. less than stellar.
The best scenario is a slow unwinding which happens gradually and lets both the chinese and the american economies to adjust slowly.
Creating a trade war on the other hand would make it all happen at once, meaning that the chinese exporters and the american consumers both must adjust ALL AT ONCE. This during a big fall in global trade. This will work .. less than stellar.
[recommended reading: http://mpettis.com/2010/03/how-will-an-rmb-revaluation-affec...]