The Renminbi (RMB) was first issued in 1949 and China instituted a dual currency system in 1978 with the RMB only usable domestically. In the late 1980s and 1990s, China worked to make the RMB more convertible on current accounts. From 1994 to 2005, China pegged the informal value of the RMB to the US dollar. In the 2000s, the US pressured China to appreciate the RMB to decrease Chinese exports and preserve US manufacturing jobs. China resisted due to concerns over affecting exports and jobs. RMB appreciation could impact China's economy, exports, investment, and production while benefiting consumers and potentially creating new jobs through innovation and industrial upgrading.
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The Value of the Renminbi
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2. In the late 1980s and early 1990s, China worked to make the RMB more convertible , The RMB is convertible on current accounts, but not capital accounts.
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4. The G7 and European Union are also in favour of a re-evaluation of the exchange rate.
6. 3 Discussion 1) Why United States of America press China to make the RMB appreciated? USA Claimed RMB is grossly undervalued , the undervalued RMB is attracting a flood of hot money into China. The RMB's undervaluation and its peg to the dollar are preventing other Asian countries from allowing currencies to rise against the dollar, since appreciation would damage competiveness relative to China. Preserve manufacturing jobs in the United States. USA claimed the overall external trade imbalances between China and USA.
7. 4 Discussion 2)Why China resisted pressure to increase the value of the RMB? Would affect the export. Would cause mainland Chinese jobs to disappear. Would also expose domestic banks to currency risks that they are not prepared to handle. the massive outflow of RMB could have a substantial effect on the currency. Many economists believe that only fixed exchange rates or floating exchange rates are stable over the long term, because a one-time change in exchange rates might cause speculators in the future to take positions on possible exchange rate fluctuations which would lead to pressure to completely float the currency.
8. 5 Discussion3)How does the RMB appreciation impact China economy and Chinese people life? affect China's export and consequently the overall growth rate of the national economy. change the commodity structure and the flow of investment. have a significant influence on the structure of domestic production resources. it will accelerate industrial upgrading – may caused job lost. . it will promote technical innovation - may create new job opp and lose the low value job opp. it will make imported products relatively cheaper. It will also be cheaper for Chinese to travel abroad.
9. 6 Discussion4) United States DebtSource :www.vikipedia.org The debt is broken down into two main categories : Securities held by the public Securities held by government accounts As of 2008, Social Security Federal Old-Age and Survivors Insurance Trust Fund holds about half of the government held portion of the debt at 2.2 trillion dollars, with other large holders including the Federal Housing Administration, the Federal Savings and Loan Corporation's Resolution Fund and the Federal Hospital Insurance Trust Fund. Most of the public debt is in notes and bills with only about one trillion in bonds and inflation protected bonds. Fannie Mae and Freddie Mac obligations excluded (taken over by US government) Foreign ownership
11. 8 US Debt -Foreign ownershipSource :www.vikipedia.org
12. 9 Role play - - has the RMB appreciation impacted your company business? benefiting your life? How? Group A – You come from China Group B – You come from USA