It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility.

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"Much more needs to be done to promote effective global rebalancing, which requires stronger demand in surplus countries and continued progress toward greater exchange rate flexibility, " Mr Lew said.

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Exchange-rate flexibility is more trouble than it is worth, advocates say, so abandon it once and for all.

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Exchange-rate flexibility (which is a prerequisite for inflation-targeting) can also bring problems.

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Moreover, successful monetary union may sometimes require governments that have lost their monetary and exchange-rate flexibility to resort to a more flexible fiscal policy.

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As for the stability pact, it seems perverse to impose artificial constraints on borrowing when both monetary and exchange-rate flexibility have just been removed and greater fiscal flexibility may be needed to compensate.

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Honed by American policymakers' past fondness for hectoring China about the need for better risk-management and exchange-rate flexibility, this emotion has come to the fore since the United States was overtaken by financial calamity.

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In the long term, living with a fixed exchange rate demands wage and price flexibility.

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Even so, China could still introduce some flexibility into its exchange rate, and so regain control of monetary policy, by adopting a wider band or by pegging to a currency basket rather than just to the dollar.

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However, by adopting the euro early, a country forgoes the flexibility of altering its exchange rate to absorb economic shocks.

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Bank Indonesia is more pragmatic than the Bank of Thailand, widening the rupiah's exchange rate trading band to 8% and ensuring more flexibility in monetary policy.

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Only then should it consider whether to allow itself more flexibility by, say, linking its exchange rate to a broader basket of currencies and thus abandoning the precious currency board.

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