Revaluation Of Yuan

Revaluation of Yuan
SYNOPSIS
On 21st July 2005, Sun roseate from the east with shocking news. china government and Peoples Bank of chinaware officially tiltd the value of their currency and so removed its peg with US dollar bill. Prior to the revaluation, $1 U.S. dollar bought 8.27 Chinese Yuan. After the revaluation,$1 U.S. dollar buys only 8.11 Chinese Yuan. This conclusiveness happened mainly due to the highpressure from US government in assemble to control growing Chinese trade surplus with US.However mainland China argued that, this trade surplus with US is happening due to change in global rescue and cost of production. In the end China concord to revoke their peg with US Dollarto a managed float by 2.1%, a much small change than 10% to 20% suggested by USgovernment. Since China economy is an integral part of Asian economy, other South East Asian countries were also compel to take immediate actions in order to maintain competitivebalance with in the region. Since China being the sales booth of global manufacturing source, manymultinational companies also got affected with new floating rate of Yuan. Many company?slost their bread margins due to the same and on the other side, companies which does not hadmanufacturing base in China benefitted from the same with their import.





PROBLEM FORMULATION
US economy is struggling to maintain their bilateral trade deficit with China due toundervalued Chinese Yuan. As a result of undervaluation, China?s foreign exchange reserveswelled to over $700 billion in 2005. Due to these issues US insisted China to reevaluate theircurrency between 10 and 20 percentage or else US will be forced to implement protectionist legislation.
Reason behind trade surplus
For early(prenominal) 10 years Chinese currency was pegged with US dollar and the rapid transformation of Chinese economy brought trade mental unsoundness with their biggest exporter , US. China became themanufacturing base for global source and thus attracted scads of foreign direct investment (Appendix 1). Due to the...If you want to stool a full essay, order it on our website: Orderessay



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