Case Study 1: The Yuan Goes Global

For the last twenty eight years, China has been quickly growing into one of the largest economies in the world. China has accomplished this feat, in part, by radically changing their policies on trade and free market interactions with other countries. During this process, China has bought approximately one hundred trillion dollars of United States debt in the form of Treasury bills, notes, bonds, and Inflation Protected Securities (Amadeo). This debt has given China leverage against the United States which has enabled China to keep the value of the United States dollar high, while keeping the value of the Chinese yuan low. As the inflation of the dollar continues to negatively affect the

In conclusion, I think that China should change its policy because it is damaging not only the U.S. economy but the economy globally. Countries such as the United States are still recovering from the economic recession we are still leaving in. It is obvious that if China let the Yuan appreciate their exports will decrease and imports will increase making their trade surplus to decrease. If this happens international countries will be grateful because by this happening means that their export will increase and employment will increase. Countries should avoid doing currency manipulation or artificially devaluing their currency because it just hurts the global economy and it promotes other countries to do the same – it hurts everyone.

Which goes back on how the dollar is back up. Another deal that countries see is that they can also exchange the Yuan which they have, to the federal banks of China into gold since their money is control in a gold standard economy.

In 2008 the central bank licensed certain sellers to set prices in foreign currencies. It was favorable for the sellers because they bought products abroad in foreign currency. This practice was used not only by the sellers with the permission but it was widely adopted.

Since July 21, 2005, China has adopted a managed floating rate regime based on market supply and demand with reference to a basket of undisclosed currency. The daily trading price of the U.S. dollar against RMB in the foreign exchange market will be allowed to float within a band of +/->0.3% around the central parity published by People’s Bank of China. The signal was initially interpreted by the international market as an indication that China would embark on a gradual shift toward increased flexibility which eventually adopt a floating exchange rate regime where the RMB will appreciate much against US dollar. However, they soon

In 2013, America imported over 440,433.5 million dollars’ worth of goods from China but only exported 122,016.3 million dollars. (U.S. Census Bureau Foreign Trade) If America and other countries trade so frequently with China and rely so heavily on Chinese manufacturing, production, and innovation, then the aspect of currency manipulation within China and its potential negative effects on world trade is a very significant topic of importance and reason to research the subject. Our

China, the largest growing market in the world, currently has a policy regarding monetary regulation that allows the Yuan to “float”. This has seen the Yuan appreciate by approximately 24% over the past few years. Today, the exchange rate between the Chinese Yuan and the American Dollar is approximately 6.3 Yuan to 1 Dollar. Some argue that China should revalue the Yuan again the dollar, establishing a more fixed exchange rate. Others believe that current should allow

´´Currency manipulation is the cause of the U.S. trade deficit with China´´ (Geithner, 2009 p8, Morrison 2009, p3, Feenstra 2006, p29 ) is one of the most common claims that economists make when regarding the current trade relationship between U.S. and China. Although several economic policy reforms have contributed to the management of the RMB (Chinese currency), the statement ´´ the larger China’s external surplus is, the more undervalued is the Yuan´´ established by Zhe (2007 p11) seems to clarify that China´s currency is being manipulated by the government. This kind these strategies in order to enhance its competitiveness. This currency manipulation is becoming a difficulty for U.S and China´s

China has pegged its currency against the U.S. dollar. If demand for dollars decreases (THERE IS PRESSURE FOR THE U.S. DOLLAR TO DEPRECIATE. IN THIS SETTING, CHINA HAS TO PURCHASE

Finally given the slowing economy in Asia the International Monetary Fund (IMF) has reclassified the yuan. Previously the IMF considered it to be “substantially undervalued” compared to other currencies. The IMF has softened its tone toward the Chinese yuan and it is now considered “moderately undervalued”. This new designation makes it harder for the United States government to make a case against and therefore policies to target the imports based on the Chinese yuan. (Davis, 2012)

It is important to understand the Chinese Yuan 's prediction and impacts since this second world leading economy can influence global economic issues through changes in its currency’s value. In order to forecast the future of Renminbi, it is essential to understand the past and current issues that affect its value. Throughout the essay, the definition of Chinese exchange rate will meant by the value of the Renminbi against the US dollar.There are many factors that could affect the value of the Chinese Yuan, but mostly through the power of the regulatory system. This essay will explain the Chinese monetary and fiscal policies that China has recently used with the description of how these regulations could determine its exchange rate within the short-term. Furthermore, this essay will wrap up with a discussion of ideas and thoughts about the prediction of the Renminbi in the long-run after the exciting news of being included in the reserve currency basket in late 2015.

First, the fixed nominal exchange rate has lost its real economic significance, the current RMB exchange rate formation mechanism is difficult to form market-clearing equilibrium rate. Practice, exchange settlement and capital management system in suppressing demand for foreign exchange at the same time creating a large part of foreign exchange supply, the central bank continued to intervene and the fact that the position of the largest market makers, erase all the differences between actual supply and demand. The central bank 's benchmark rate to determine the true market supply and demand balance is not the result can not reflect the market changes.

In recent years, China’s balance of payments always keeps “double favorable balance”. In 2005, China’s national economy developed quickly and stably. The exchange rat of RMB became more flexible. The current account surplus increased obviously and the capital account surplus decreased. The foreign exchange reserve still increased quickly. In 2005, Chinese government did some fiscal policy and monetary policy. Such as decreased government expense, raise the tax rate, used managed floating system, improve the foreign exchange management, enlarged the foreign exchange market. We can conclude that china’s BOP will still keep “double favorable balance” and keep

With China's deepening Opening Up and economic restructure adjustment and the continuous appreciation of RMB in recent years, the

In 1994 the Chinese government made the decision to peg the RMB to the US dollar at a rate of US$1 to RMB8.7, a year later the Renminbi appreciated 5% and was revalued to RMB8.28. This rate would remain unchanged for the next 10 years, even though the Chinese faced heavy scrutiny and pressure to revalue their currency. The Chinese exercised many policies in maintaining their exchange rate. The PBoC controlled the amount of foreign currency by forcing all exporters to immediately sell their foreign currency to designated banks. The RMB could only be traded on the China Foreign Exchange Rate