Essay on Political Economy of Yuan-Dollar Exchange rate

Essay on Political Economy of Yuan-Dollar Exchange rate

Length: 1658 words (4.7 double-spaced pages)

Rating: Powerful Essays

Open Document

Essay Preview



  The Chinese exchange rate policy has been one of the top topics of debate in recent years. It has attracted a great deal of attention in academic and policy area due to the slower pace of economic growth and manufacturing job creation from the beginning of 21st century and recent financial crisis in United States. China has been accused of pursuing new mercantilist policy, that is, encouraging export and impeding import mainly through the manipulation of exchange rate between Chinese currency known as Renminbi and US dollar. China was maintaining its currency strongly pegged with US dollar from 1994. Some recognised economists and policy makers are repeatedly blaming the Chines exchange rate policy for the prolong financial crisis and sluggish recovery where as some other prominent economists provide the different opinions.

  The debate on Chinese exchange rate policy started from the East Asian crisis in 1997. But it has been intensified only after the publication of some articles on economic newspaper in western world (Financial Times) and in Japan (Nihon Keizai Shinbun). Afterwards, government officials of USA and Japan on many occasions urged and pressurized the Chinese authority to allow more flexibility for the movement in the Chinese exchange rate. In G7 meeting of 2002, the Japanese Finance Minister Masajuro Shiokawa raised the concern over the manipulation of currency exchange rate by China, and asked the G7 community to jointly put pressure on the China to appreciate its currency so as to combat global deflation. The then US President George W. Bush and Sectary of Treasury John W. Snow also touched this issue during the different meetings with different Chinese high officials on various occasion in 2003. In early 20...


... middle of paper ...


...(2003): 267

Rogoff, Kenneth. "Deflation: Determinants, Risks and Policy Options-Findings of an Interdepartmental Task Force". International Monetary Fund, 2003

T'ang, L. L., and Thung Liang Lee. "The Problem of Chinese Currency." Economica (1923): 109-121

Williamson, John. "Estimates of FEERS." Estimating Equilibrium Exchange Rates 177 (1994): 245

Williamson, John. "The renminbi exchange rate and the global monetary system." Lecture at the Central University of Finance and Economics, Beijing, October 29 (2003).

Wu, Hsiu-Ling. "Testing for the fundamental determinants of the long-run real exchange rate: The case of Taiwan." In Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pp. 377-402. University of Chicago Press, 1999

Yu, Yongding. "Eliminating the Dread to RMB Appreciation." (2004).

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay about China Noah 's Potential Currency Exposure

- 1. What is the business reason for China Noah’s potential currency exposure. Does the company need to subject itself to substantial exchange rate risk. Is the risk “material” to China Noah. Do you think China Noah should hedge. The business reason that led for China Noah’s potential currency exposure is the fact that the company wanted to shift its business of procurement of wood to Indonesia. The procurement that was to be moved to Indonesia was to be that of a large portion of raw materials. The company wanted to shift its procurement to Indonesia because the country had abundant wood resources, and since the market of the supply of tight wood was increasing in China every year the company...   [tags: United States dollar, Renminbi, Exchange rate]

Powerful Essays
1331 words (3.8 pages)

Questions On Exchange Rate Fluctuations Essay

- (c) A consideration of the key risk factors that are relevant to the decision whether to undertake the investment, with suggestions on how these risks might be managed. 1. Exchange rate fluctuation risk Exchange rate fluctuations come in three forms, which is economic exposure, transaction exposure and translation exposure. Exchange rate movements will lead the cash flows become more volatility. First, “Economic exposure – This is lesser known than the previous two, but is a significant risk nevertheless....   [tags: Management, Risk, Exchange rate]

Powerful Essays
1742 words (5 pages)

Foreign Currency Exchange Rate That Impact The Profitability Of The Company

- Small businesses such as Alliance Design Concepts are great examples that shows a fluctuation in the foreign currency exchange rate that can impact the profitability of the company. Small businesses have to understand the risk when they doing business on an international level. Very often the exchange rate value will not work in their favor. In case with Alliance, since they were using an international supplier, they needed to make sure they have converted all the cost of equipment from USD to CAD....   [tags: Foreign exchange market, Exchange rate, Currency]

Powerful Essays
792 words (2.3 pages)

Notes On Foreign Exchange Market Essay

- Trevir Nath Top Forex Risks The foreign exchange market, forex for short, is the buying and selling of currencies around the world. Like stocks, the end goal of forex trading is to yield a net profit by buying low and selling high. Favorable for forex traders, they have the advantage of choosing a handful of currencies rather than parsing through thousands of companies and sectors. In terms of trading volume, forex trading are the largest markets in the world. Due to its high trading volume, forex assets are classified as highly liquid assets....   [tags: Foreign exchange market, Exchange rate]

Powerful Essays
716 words (2 pages)

Essay on Foreign Currency : Foreign Exchange Market

- Forex simply means buying and selling of foreign currency in ‘Foreign Exchange Market’. People call it ‘Foreign exchange currency market’ or ‘foreign currency market’ or ‘FX market’. It is the largest and most liquid financial market in the world with an average turnover of near about U.S. $4 trillion on daily basis. In order to conduct foreign trade or business, currencies needs to be exchanged. Example: You are based in India and want to buy chocolates from Switzerland, you will pay the cost of chocolates in Swiss franc since you are importing....   [tags: Foreign exchange market, Exchange rate]

Powerful Essays
857 words (2.4 pages)

China 's Exchange Rate Reform Essay

- There are several events regarding China’s exchange rate reform. Arguably, the first step happened in 1994. Before 1994, RMB exchange rate was overvalued, marking at 1.5 Chinese yuan/ US dollar in 1978. Then, the Chinese government implemented several measures to directly depreciate the currency and introduced dual-track exchange rate, ensuring that RMB exchange rate could reflect market mechanism and approach equilibrium exchange rate. Later on January 1, 1994, PBoC declared the unification of official and market RMB exchange rate....   [tags: Foreign exchange market, United States dollar]

Powerful Essays
741 words (2.1 pages)

Top Forex Risks : Foreign Exchange Market Essay

- Top Forex Risks The foreign exchange market, forex for short, is the buying and selling of currencies around the world. Like stocks, the end goal of forex trading is to buy low and sell high. However forex traders have the advantage of choosing a handful of currencies rather than discerning through thousands of companies and sectors. In terms of trading volume, forex trading is the largest markets. Due to its high trading volume, forex assets are classified as highly liquid. The majority foreign exchange trades consist of spot transactions, forwards, foreign exchange swaps, currency swaps and options....   [tags: Foreign exchange market, Exchange rate]

Powerful Essays
702 words (2 pages)

Questions On The Foreign Exchange Market Essay

- INTRODUCTION One of the fundamental topics in the foreign exchange market is to know how information is reflected in the determination of prices. This question is also true for any topics in financial economics but it is all the more important in the currencies market, which is the largest market in the world. The first searches about the correlation between the releases of macroeconomic data and the foreign exchange rate between two currencies were made in the early 1980s. Meese and Rogoff (1983) first try to demonstrate that exchange rates could not be explained by fundamentals....   [tags: Foreign exchange market, Exchange rate]

Powerful Essays
1307 words (3.7 pages)

Essay on Foreign Exchange Markets And Foreign Markets

- Foreign Exchange Markets The foreign exchange market is fundamentally a market in which various national currencies are bought and sold. There are as many currencies as many foreign nations. In any international transaction, it involves conversion of one currency into another. Foreign exchange markets is the mechanism for the arrangement of converting one currency into another. When we buy commodities from foreign countries, we have to convert our currency into foreign currency to make payment....   [tags: Foreign exchange market, Exchange rate]

Powerful Essays
873 words (2.5 pages)

Justification Of The Internalisation Of Chinese Yuan Essay example

- Justification of the internalisation of Chinese Yuan 1. The significance of the internationalisation of the Chinese Yuan The essence of currency is to serve as a universal equivalent of special goods, with the function of being value measurement, flow flux method, payment method, store method and the world monetary. International currency aims at international settlement and plays the function of value scale, circulation method, payment, and also served as the world currency with the other functions of part or all of the currencies....   [tags: United States dollar, Currency]

Powerful Essays
2335 words (6.7 pages)