I think an overlooked aspect of the Chinese pegging policy for the Yuan is the effect on pricing that could drastically distort aspects of China's domestic economy.
According to the following WSJ article, China's thirst for oil will dramatically increase during the next 25 years as its economy expands and more people own cars.
Chaxan, Guy, 2010. IEA: chinese demand to drive oil prices higher. The Wall Street Journal, Nov. 9.
The article praises China's efforts in alternative energy and electric vehicles while also noting that the country's demand for petroleum will continue to rise.
By pegging the Yuan to the US Dollar and keeping the value of the currency low, China is artificially reducing the cost of petroleum imports that are priced in the world's reserve currency, the US Dollar. Ongoing, this will cause a mis allocation of petroleum in the overall economy and perhaps doom efforts to increase the efficiency of energy use, an area where China needs dramatic improvement.
As an outcome, Chinese people will purchase more automobiles at the marginal exclusion of using public transit. I think this is a big mistake that will eventually have significant negative economic consequences.
The Chinese National Development and Reform Commission (NDRC) will perhaps manage the situation via macro rationing as was done during the high energy prices of 2008. However, a mandated rationing approach will cause massive disruption to industry and society much like was the case in India during the 1980's when electric power availability was sporadic.
The pegging of the Yuan has wide ranging implications that are unanticipated. This is dangerous for China in addition to being a risk factor for the global economy going forward.
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