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For instance, say the PBOC decides that they will set the rate at $1=7CNY. Is it just an announcement by the PBOC whereby now all Chinese banks/financial institutions have to follow this fixed exchange rate(give or take 2%) which in turn forces foreign entities to follow this rule as well if they want to exchange with Chinese entities. Or does the central Bank intervene by injecting/removing from the money supply to arrive at this reference rate?

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