Which government pegs it? Do both have to do it and if you can just artificially peg it, why couldn't the US peg its currency to the Euro if it wanted to prevent a slide? And if currency trading is a market and one is able to trade Chinese currency, wouldn't it have to fluctuate at market prices instead of at a fixed price?
Only the home country has to peg it. If it declares its currency to be worth whatever to the dollar, and is willing to exchange currencies at that rate, there's little the other country can do about that.
I don't know if you can trade the Chinese yuan or not, but there wouldn't be much point in it since it would fluctuate precisely in relation to whatever the dollar was doing at the time.