China how do they keep their currency so undervalued

jas72

jas72

jas72

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They are massive net exporters - an undervalued currency makes their exports 'cheaper' and so more competitive. :)
 
They are accused of interfering with the market to keep the Yuan artificially low. IIRC the US government in particular are annoyed about this, which is a bit rich considering GWB did exactly the same thing during his time in power.
 
scorza said:
They are accused of interfering with the market to keep the Yuan artificially low. IIRC the US government in particular are annoyed about this, which is a bit rich considering GWB did exactly the same thing during his time in power.
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Americans being hypocritical? Who would have thought it.

I'm sure if we did the same (not that we have to artificially keep the value of the pound low!) the EU would kick up a fuss, or the French at least.
 
They tightly control the Yuan, in terms of the amounts you can buy and exchange. They also effectively control the exchange rate of it against the dollar, although its not truly pegged to it now iirc.

Effectively they are artifically decreasing the cost of chinese imports in the US, which is an incentive for US investment in China which is what they want.

The US complains about the practice as its widening their trade defecit with China, but you're unliekly to see China give in, given the amount of US dollars it currently holds, and therefore if the Yuan appreciated massively, then it would decrease the value of all the dollars the chinese government currently holds, which they're obviously keen to avoid!
 
I remember reading an article about just how much danger the US is in from the dollar reserves China has, and should they decide to short or dump it.
 
platypus said:
Americans being hypocritical? Who would have thought it.

I'm sure if we did the same (not that we have to artificially keep the value of the pound low!) the EU would kick up a fuss, or the French at least.
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Play by the rules, you lose in this world :(
 
platypus said:
I remember reading an article about just how much danger the US is in from the dollar reserves China has, and should they decide to short or dump it.
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Fortunately China would also be in pretty dire straights if it deliberately broke the Dollar.

Their store of wealth would be trashed.
Exports would collapse.
There is not enough local demand to take up the slack.
Large numbers of very poor, unemployed people with no government safety net would make for a regime threatening situation.

China's only real option is to ride the wagon till the wheels fall off then use their stack of Dollars to hoover up as many high tech and natural resource companies they can. The US would be in no financial state to stop them or prevent them taking all that tech back to China.
 
Be quite frightening for China to be in a bad mood with you. Totalitarian state with half worlds population and nuclear weps to boot... Quite a formidable force.
 
China has quite an interesting economy and I'd love to learn more about it. Technically they have been in a recession for 12 years (or am I confusing with Japan?) but it hasn't affected the country in terms of affluence. They are pretty much self sufficient and sit on their own reserves. They have been hoarding resources for years though, would love to know what they are up to ;)
 
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