In July 2005, the Chinese Government unpegged the RMB from the US dollar. As the RMBhas followed a remarkably predictable appreciation over time, I examine the price of Chineseexports to the USA after unpegging the exchange rate. Results suggest that the Chineseindustries with greater import market share were able to raise their prices after the removalof the pegged exchange rate regime; however, over time there is a significant deflationarytrend. Chinese export prices tended to decrease under an unanticipated RMB appreciation;this effect was more pronounced for industries with more pricing flexibility. This suggeststhat Chinese exporters are consistently “pricing to market” and thus creating a significantforeign exchange policy implication. Specifically, a more flexible exchange rate regime willlikely have little impact on the prices of Chinese exports to the USA but might increase theprofit volatility of Chinese firms. In July 2005, the Chinese Government unpegged the RMB from the US dollar. As the RMBhas followed remarkably predictable appreciation over time, I examine the price of Chineseexports to the USA after unpegging the exchange rate. Results suggest that the Chineseindustries with greater import market share were able to raise their prices after the removal of the pegged exchange rate regime; however, over time there is a significant deflationarytrend. Chinese export prices tended to decrease under an unanticipated RMB appreciated; this effect was more pronounced for industries with more pricing flexibility This suggeststhat Chinese exporters are consistently “pricing to market ” and thus creating a significant flexible exchange rate regime willlikely have little impact on the prices of Chinese exports to the USA but might increase the proficiency volatility of Chinese firms.