The Chinese Renminbi (RMB) is very strong against the US dollar due to increased supply of dollars and has moved from 8 RMB/$1 to 6 RMB/$1. The People Bank of china decides to intervene by selling Renminbi and buying US dollars to move the exchange rate to 7RMB/$1. The intervention is of the non sterilized kind. Using a diagram for the supply and demand for dollars in the forex market, illustrate and comment on the intervention undertaken by the People Bank of China. Also comment on the implications of the intervention for the money supply in China and Chinese short term interest rates.