U.s. Dollar, China's Central Bank

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.

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

China devaluation will have a negative impact on Brazilian economy, as china is Brazil largest export market. Weaker Yuan for Brazil means loss in terms of trade with the Asian giant, even though these are not normal events in Brazil, as they are facing the worst economic downturn in two decades. Even though this even has a negative impact it also has a positive impact and that the Brazilian real has fallen to its lowest level in 12 years and favoring Brazilian exports abroad. Even though the Yuan has dropped by about 3%, the Brazilian real has lost 23% of its value. Even though the Brazilian economy is in crisis due to china but more to do with the overall slowdown of the Asian economy.

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

Concerned investors overreacted to the news of a slower Chinese economy, which partly explains the stock market turmoil in the U.S. and around the world. China’s economy is not immune from the business cycle. Its economy’s growth rate eventually came down from the double digits to the single digits as it undergoes structural changes. China is shifting from an export-led to a domestic consumption driven economy. Since 1976, the beginning of China’s journey towards integration into the global economy, annual GDP growth averaged 9.5%. Since 2012, growth has been below average falling to 6.8% in the fourth quarter of 2015. While it can be argued that China’s economic slowdown has both direct and indirect effects on the U.S. economy through trade and financial flows, a slowing Chinese economy has marginal effects on credit unions. Moreover, it is difficult to aggregate the effects of China’s economic slowdown in future U.S. economic growth.

A country intentionally lowering the value of its currency may not seem like it would be beneficial to the country’s economy, but this practice does in fact have its advantages, which is why some countries have used it. To do this, a country, for example China, would overprint its own currency and then use that currency to buy U.S. dollars, which decreases the amount of U.S. dollars. This means there is more of China’s currency, the renminbi, relative to U.S. dollars. With more of China’s currency in the market, the renminbi’s worth decreases (Forbes article). With China’s currency worth less, Chinese goods are cheaper, so the U.S. and other countries’ demand for exports from this country increases. This demand in exports helps China’s economy grow. This is overall consistent with what we talked about in class and with economic law in general: an increase in the price level will increase aggregate demand for goods and services (Mankiw 20-3). According to Chapter 19, section 19-3c of the textbook, a country’s currency can also weaken in foreign exchange markets when the country sees an increase in capital outflow. This is because the outflow becomes inflow in another country, say, the United States, and this increase in inflow strengthens the

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)

The China’s central bank began to roll out money policy as the People’s Bank of China sold three-month bills at a higher interest rate for the first time in 19 weeks, as reported by Bloomberg (2010). The central bank previously have loosen monetary policy as it kept its benchmark one-year lending rate at a five-year low of 5.31 percent after five reductions in the last four months of 2008 and in the first 11 months of 2009 allowed a record 9.21 trillion of new bank loans.

The phrase “Currency War” was used to describe the efforts of nations to devalue their own currencies, in order to increase their competitiveness of export in the international market. In the context of the reading, major players in the currency war from 2010 to 2013 included the U.S., European countries, China, Switzerland, and Japan, each using different ways in devaluing the domestic currency: the US printed a lot of money via quantitative easing (QE) ; China controlled capital inflows through accumulating foreign currency reserve and undervaluing renminbi; Switzerland prohibited the franc to appreciate further against the euro; and Japan announced the unlimited purchasing of government bonds-which increases money supply-to counter economic downturn.

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

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

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

For the past decades, China has been in the limelight for inflationary episodes. Funke (2006) has compared this phenomenon as a “roller coaster ride”. But Girardin et.al. (2013) argues that there is a remarkable inflation performance over the past decade, in spite of the absence of explicit inflation targeting. This section shall focus on the inflations of the recent past of China. To contextualise this section, how inflation became a normal trend of China’s economy, the third, fourth and fifth phase of the economic reform of China shall be presented according to the study of Funke (2006). During the third (1988–1991) and fourth phase of economic reform (1992-1998), the reform process was characterized by lack of effective macroeconomic policy intruments. The effect was a substantial increase in inflation after price liberalisation. The fifth phase of economic reform (1998 to present) can be characterized by broad-based enterprise, financial and social reforms. Inspite the sound mix monetary policies of the People’s Bank of China, the fifth phase of economic reform apparently still have substantial inflation increase. Figure 1 shows inflation peaks for years 2004, 2007, 2008 and 2011 respectively.