China’s decision to tighten its grip on the renminbi's exchange rate indicates that it has no intention of playing by the rules of the game. Indeed, if the Chinese government were serious about opening its capital market, it would have to implement reforms that would threaten its model of political and economic management.

SANTA BARBARA – Last week, the Chinese government tightened its grip on the renminbi’s exchange rate. China has now effectively reneged on a promise it made 18 months ago, when it lobbied its way into the basket of currencies that determines the value of the International Monetary Fund’s synthetic reserve asset, the Special Drawing Right (SDR).