Since the outbreak of the East Asian financial crisis in July 1997, the Peoples Republic of China's(PRC) currency, the renminbi(RMB), has maintained a constant exchange rate with the U.S. dollar. Following the downturns in PRC exports and financial growth, however, the potential devaluation of the RMB has become a major concern in the international trade market. There are numerous factors that will affect China's exchange rate; besides domestic and international financial factors, there are also political considerations. The relationship between these aforementioned factors are complex. Moreover, policy making in the PRC is significantly influenced by her elites and is thus fundamentally different from the decision making in the Western countries. It is, therefore, difficult to apply Western financial theories to predict what will happen to the RMB. The RMB should be able to maintain its value, at least before the second term of 1999. However, the degree of recession in the PRC, the capability of PRC officials to handle the recession, the financial recovery of the East Asian countries, and the strength of their currencies especially the Japanese Yen, all may affect the stability of the RMB.