Tuesday, January 19, 2010

China's hot money headache, continued

Following up my previous post on China's hot money problem, here is another update (source: WSJ):

Capital control will never be effective. This is a classical problem for fixed-exchange rate system. No easy way out. It's just a matter how big will be the hit when all hot money tries to get out at the same time.

A one-time reevaluation or even more dramatic measures may be on the horizon. And when it happens, don't get surprised.

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