As the dollar reaches fair valuation with the yuan, the impact would certainly be extraordinary as China loses its unfair price advantages to competing countries like the U.S., Europe, Japan and South Korea. In order to maintain the same peg to the dollar that it has kept since 1996, China has been increasing its money supply to keep the value of the yuan low. China's money supply has risen from 19.6% in 2003 to 14.6%, a situation that can cause inflation as well as undesirable asset bubbles that would further present the risk of additional bad loans. These are already a problem as state companies and developers have racked up bad debt. If the Chinese government discontinues foreign exchange intervention, the yuan would certainly appreciate given the estimates of its signification undervaluation. However, yuan appreciation would not be a desirable outcome because China is trying to keep its unemployment low through cheap exports. As a more viable alternative, China could relax its capital outflow policies by...
Thus, China would not have to sell as much yuan to buy up foreign currency inflows which would help abate inflation.
One could expect a dollar depreciation of 2.5%. Because the 25% appreciation in the yuan represents the amount it is currently undervalued against the dollar, one can expect a significant drop in the demand for China's goods. However, the appetite for foreign goods in general will still be strong as the U.S. turns to China's competitors such as Europe, South Korea and Japan. China relies on a fixed exchange rate rather
8% as compared to the dollar in the start of the last year to January this year. The value of Yuan has improved even with the fall of other emerging economies. The loss of competitiveness that resulted can be best demonstrated by a ratio that has been calculated by the Hong Kong Monetary Authority, which makes a comparison of Yuan with the currency of the other emerging markets that are
China Under Communism, Confucian values, considered vestiges of the old feudal system, were supposed to have been completely swept away. Judging from what you have read from the readings, do you believe Confucianism completely disappeared after 1949? Confucianism is the philosophical and ethical system of belief based upon the teachings of the Chinese philosopher Confucius. The core belief of Confucianism was humanism which is the belief that human beings can change, adapt,
China's Economic Challenge to the U.S. The rise of China as an economic superpower has occurred against the backdrop of increased globalization and the explosive growth of the developing world and the other BRICS nations (Brazil, Russia, India, and S. Africa). China's growing prominence in the global financial community manifested itself in 2010 as "Japan ceded its spot as the world's second biggest economy to China. Japan's nominal GDP for 2010
While at the same time, it will make imports in Hong Kong / China cheaper in relation to goods that are manufactured in both locations. Over the course of time, this will cause the trade surplus that Hong Kong / China enjoys decreasing as both markets begin to buy the cheaper foreign imports. ("The Impact of China's Revaluation of the Yuan," 2005) Yet, both Hong Kong and China are facing
Dorchester The Decision For Dorchester, the decision about which foreign country in which to invest will be based on a number of different factors. The first of these factors is the economic. We have considered the different elements of the foreign currency issue, but the company must also consider the different local markets. Other factors will have to include the trade environments with the three different countries, because these will also need
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