A good friend of mine just told me that 24 months ago, the Chinese ( who take in our dollars for the manufactured goods that they sell to the U.S. ) purchased an amount of dollar denominated investible assets ( U.S. Treasuries ) at a rate of 76%. He now says that this rate has plummeted to 24%. The Chinese Renminbi has been pegged at roughly 8.28 to the dollar since 1995 and, by now, is clearly undervalued, perhaps by as much as 40 percent due to China using its massive reserves to buy dollars. Many would argue that it is only China's "artificial" involvement, using its reserves to buy dollars and US Treasury bonds ( conveniently helping to finance the US budget deficit as well as the current account deficit ) that can keep the renminbi from breaking free of its peg. But can a floating Renminbi based on a basket of currencies be too far off? Will this lead to an even weaker dollar? Will China's fragile banking system be able to handle this? Could it lead to large purchases of gold? Any thoughts?