Economies – with Special Emphasis on China

tively. In this paper, we discuss the new aspects of exchange rate policy which can be observed in the e-merging market economies and their most likely implications for allocation, distribution and stabili-zation goals. A special emphasis is put on the Chinese case, where large interventions in the foreign exchange market point at a significant undervaluation of the Renminbi. With many alternatives at choice, Chinese authorities still prefer to peg their currency, by and large, to the US-Dollar. On July 21, 2005 a moderate revaluation and the introduction of a basket peg was announced, but a basket peg strategy is not yet visible in empirical figures. On the background of Germany’s experiences of 1969, almost on the eve of the Bretton Woods ’ system collapse, we model a speculative attack on an undervalued currency in the vein of the Flood-Garber seminal paper from 1984. The contents of the model are reflected against today’s reality in China, but also against Germany’s experiences in the past century. We come to the conclusion, quite in line with Germany’s experience of 1969, tha