International Business - China
Why is the value of the yuan relative to the dollar so important?
The Chinese government has the power to dictate the value of the yuan vs. The U.S. dollar. The fact is that a strong U.S. dollar makes it more difficult for American companies to export competitively and when the dollar is weak that can (and does often) reflect that imports are reduced and U.S. exports have more strength.
In other words, when China's yuan is very low against the dollar, Chinese exports are cheaper than American exports. Hence, it behooves China to keep its currency low, and on the other hand for American companies, they say that gives China an unfair advantage. According to the article "A Weak Dollar vs. A Strong Yuan," China has deliberately kept its yuan low, and this irritates the U.S. because American leadership (and Congress) argue that China should let the yuan appreciate or in other words China should encourage a stronger yuan. Some members of Congress call China out for manipulating its currency in order to give its companies an unfair advantage.
There is an irony within this situation and American companies are part of the irony. When it comes to manufacturing in China, about 60% of exports from China to the U.S. are not produced by...
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