Effects Of Devaluation Of Yuan For Chinese Economy

1688 Words Nov 24th, 2015 7 Pages
On August 11th China’s central bank has cut the rate of the national currency, the Yuan by nearly 1.9%. The next day it devalued it by a further 1.6% to around 6.3306 per dollar and on the next day by a further 1.1% (Chandran, 2015). It seems to be a really small devaluation, but because China’s rapidly economy growth is such a major motor for the global economy, this policy could be a wave to Chinese market, even the global economic market. This essay will talk about the impacts of devaluation of Yuan for both Chinese economy and other countries’ economy. Firstly, it presents reasons why China decided to devalued Yuan. Then, it outlines the possible influence taken by that policy in China. Finally, it examines what will happen if China’s central bank implements this policy for rest of world.

There are a number of reasons why China took this monetary action. One argument is that China’s authorities try to use this shock decision – devalued Yuan to boost slowing growth. Spence (2015) states that there was an unexpectedly rapidly fall in Chinese exports in July and the fastest fall in factory gate price in almost six years had put a great pressure to the People’s Bank of China (POBC). He (2015) also notes that China is one of the world’s biggest consumers of a lot of goods such as oil, metals. The slowdown of China’s economy is expected to drag down corresponding goods exports from other countries. Therefore, this monetary policy could stimulate growth, not only for China but…
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