Does China’s fear of floating exceed its fear of deflation?

When economists passjudgment on exchange-rate regimes, they like to invoke the monetary-policy “trilemma”. A country might want a stable currency, free capital flows and an independent monetary policy, which can respond to the needs of the domestic economy, regardless of what central banks elsewhere are doing. There are, however, intrinsic tensions between these objectives. And so, sad to say, a country can choose only two of the three.The trilemma is a canonical bit of theory. In practice, however, the choice is not so stark. No country can have all three blessings in full. But some countries, such as China, like a little of each.