Module 1 Case Study

dollar was close to an eight year shortage against the real, having lost more than 33% of its value during 2009 alone. During the past 12 month era, the exchange rate of the U.S. dollar (USD) has diverse from a low of BRL R $1.5310 to in height of BRL $1.7790. During 2010, the United States dollar typically kept an everyday exchange rate between (BRL) R$1.70 and (BRL) R$1.80, occasionally reducing below the (BRL) R$1.70 level.

These effective strategies helped Hong Kong overcome the financial crisis. All these facts fully demonstrated that China is a responsible big country. After the Asia financial crisis, the importance of China's economy has been brought into focus; China's neighboring countries have begun to recognize the influence of the Renminbi.

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.

With trade, a growing population, and the government not being able to pay for things came hyperinflation, simply a great depression. Although we are a leading economic nation right now, China’s economy is at an incredible pace and can and in many ways already has taken over ours. As Rome did, we often overextend our reach beyond the point of return on investment. We owe China lots of money to begin with from buying things from them, and also borrowing money. From what I understand, if China sells off our treasury yields, it will make our currency not worth as much. When our currency isn't worth as much it causes inflation, which can cause a major downfall.

The financial crisis of 2008 has been described as the worst financial crisis the world has seen since the great depression, but there are now murmurings of the potential for an even greater financial crisis, a currency crisis, caused by the demise of the US Dollar. The Dollar has been the reserve currency of the world since it took over from the Pound at the end of world war two, but we examine if it is about to crash spectacularly?

The change in the exchange rate policy to move to a more flexible floating exchange rate system will inevitably compromise China’s current advantageous position in trading especially the export which takes a heavy weight in China’s GDP. The appreciation of RMB will deprive the Chinese enterprises of the advantage to leverage the cheap materials and labor to compete in the international market. This might be a positive indication for China’s importers who has a focus on the domestic markets rather than the international market, where the importers’ purchasing power gets enhanced if the domestic currency appreciate. However, China is still heavily relying on export to grow their GDP at this point and a revaluation of RMB would be very dangerous for the country. Thousands of factories counting on exports might be closed and millions of workers would lose their jobs. As pointed out by Morgan Stanley Economist Andy Xie in the case, “China’s priority is stability and currency flexibility should not be allowed to conflict with this goal”. On the flip side though, a revaluation of the RMB would not necessarily change the current situation of US and EU who had a large trade deficit with China. The reduced imports from China are unlikely to stimulate the growth of the domestic productions of those

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

selected currencies is one of the approaches to make money. For the past many years,

Xiaohe Zhang School of Economics, Politics and Tourism Faculty of Business and Law The University of Newcastle. Callaghan, NSW 2308, Australia Telephone: 612-49215034 Fax: 612-49216919 Email: James.Zhang.@newcastle.edu.au Abstract Since the beginning of the economic reform process in 1979, the Chinese currency (yuan) was devalued on many occasions until 1994 when the two-tier foreign exchange system was ended. While the official rate of yuan had been maintained constant over seven years since 1998, the pressure on the revaluation of yuan intensified. After years of speculation and hearsay, China finally revalued the RMB by 2.1% in July 2005. There are arguments currently on how and to

In fact since 2005 amid pressure from the United States the yuan has risen 23% in value against the dollar. Analysts believe that the yuan will depreciate as much as one percent this year not because of government manipulation, but because of slowed economic growth which has decreased China’s trade surpluses. (Law, 2012)

     In the present day, the world's economy is ever-changing and adjusting. Many different reasons control the reasons for this. The future of currency is something that can only be predicted and is not guaranteed. However, there are many determing factors behind the changes that can take place. Asia and North America are two continents that have economies that have recently changed or are in the midst of change.

Investing in emerging markets offer tempting advantages to investors. The volatile economies of countries considered to be in this category have a potential for extraordinary returns. A caveat to investors considering opportunities in emerging markets are the presence of unstable governments, the chance of nationalization, poor property rights protection, and large swings in prices. Emerging markets are far from a sure thing. But, despite high individual risk, emerging markets can reduce portfolio risk. The volatile economies of these countries have such low correlations compared to the domestic market that they actually provide the greatest degree of diversification.

Secondly, the fixed dollar-pegged exchange rate system and monetary policy, the independence of the existence of a fundamental conflict, undermine the effectiveness of monetary policy cannot meet the needs of economic development. Monetary policy autonomy is essential for China’s macroeconomic stability; monetary policy should take precedence over the independence of significant exchange rate stability. But the Yuan against the U.S. dollar exchange

The US and Europe felt that the RMB was undervalued for several reasons. One reason is that China’s exports had dramatically increased, growing 30% from 2004 to 2005, making China the third largest exporter in the world and accounting for

Abstract: Recently, the appreciation of RMB has been a hot topic and caused a heated debate. For China, it not only involves the changes in the RMB revaluation, but also affects China 's external trade. Through reviewing the RMB