always a wise approach.

How does maintaining a fixed rate for years give someone a competitive advantage?

a) from a global point of view, China's exchange rate has not been fixed. It has moved v. the dollar. So (leaving aside the mini-rally v the euro recently) it has trended down v. most of the world. Shock of all shocks, China's exports started to balloon after the dollar stopped rising. See the world bank.

b) from the US point of view, Chinese productivity has been growing quite fast, if for no other reason that China is investing a ton, and each unit of labor now comes with more capital. This normally leads to a real exchange rate appreciation over time -- China's external purchasing power should grow in line with China's growing productivity/ expanding economy/ greater capacity to produce. That can happen if Chinese inflation is higher than US inflation, or if China's exchange rate rise v. the $. Neither has happened. Real exchange rates could also adjust if US wage and price levels fell toward chinese levels, but that generally is not much fun. Read Jeff Frankel on this -- his paper is a bit dense, but he notes that China's global purchasing power is now well below what one would expect given Chinese productivity growth.

Dan -- thanks for the plug

Dan is lazy. In a very sophisticated kind of way.