China is learning about the basic principles of open economy macro: Sterilize the balance of payments surplus or experience increases in output that eventually lead to inflation. Use the TB/Y diagram or the Fixed Exchange Rate MF model to show how the undervaluation of a currency leads to massive reserve accumulations that must, eventually, be sterilized. It will be an interesting case study to count the ways in which China will try to maintain control of its money supply, and how follow effective each measure is going to be.