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

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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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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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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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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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