History is replete with examples where states have interfered with foreign exchange markets in order to influence exchange rates. The trade conflicts between the two world wars, for instance, were fought not only via the imposition of tariffs, but also via competitive devaluations. Since then, straightforward competitive devaluations have become a rare phenomenon; contemporary scenarios, in which exchange rate policies are criticized for their potentially protectionist impact, tend to be much more sophisticated. The exchange rate policy followed by China is certainly the outstanding, yet not exclusive, example. In recent years policymakers worldwide have criticized China for maintaining an undervalued real exchange rate as part of its strategy of export-led growth.
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