Sir, Sir Samuel Brittan makes a persuasive case from the Chinese vantage point as to why they should be left to continue liberalizing their financial system until they feel able to float their currency ("China's currency is its own business," June 24).

However, he completely glosses over China's obligations as a participant in the global financial system not to engage in prolonged one-way intervention in the currency market in order to maintain an undervalued exchange rate.

Under the second amendment of the International Monetary Fund's articles of agreement, member countries are free to choose whether to fix their currencies, to float, or to do something in between. However, from its very beginning in 1944, the IMF's articles specifically enjoined countries "to avoid manipulating their exchange rate or the international monetary system in order to prevent effective balance of payments adjustment or to gain unfair competitive advantage over other members." The IMF did so against the troublesome experience with the competitive depreciations of the 1920s and 1930s.

Over the past 18 months, China has been intervening in the exchange market at a rate in excess of Dollars 200bn a year in order to prevent its currency from appreciating. It does so despite the fact that its international reserves now exceed Dollars 650bn, or one year of its import payments. If that does not constitute prolonged one-way currency manipulation to maintain an undervalued exchange rate, one has to wonder what does.

Desmond Lachman is a resident fellow at AEI.