Why A Currency Board Is A Rule Based Monetary Institution

Why A Currency Board Is A Rule Based Monetary Institution
A currency board is a rule–based monetary institution that first established in the British colony of
Mauritius in 1849(Kwan and Lui, 1999). Since then, the board introduced to more than 70 countries
and issued money for British colonies, which included Africa, Asia, the Caribbean, and the Middle
East as well as a few other small countries (Walters and Hanke, 1992). This development reached its
heyday in the 1940s (Hanke, Jonung, and Schuler, 1993). After that, the Second World War changed
this situation. The newly independent territories from British colonies replaced the currency board
system to the central bank system. Until now, few currency boards still survived. Hence, some
people supported that the currency boards is out of the centre stage with losing its practical
importance on the basis of historical experiences. However, Kwan and Lui (1999) did not share the
identical view with these people. They argued that the currency boards begin to attract widespread
attention due to the effect on maintaining stable exchange rate, which is a significant feature to
confront the global financial crisis. Because of this characteristic, Argentina (1991), Estonia (1992),
Lithuania (1994) and Bulgaria (1997) have promulgated the law to support establishing the currency
boards. If the result of this measure can stabilize the currency and economic effectively, many
countries will introduce the boards eventually. As Schwartz (1993) had commented, "a watershed
would have been reached
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China 's Act For The Internationalization Goal Of Renminbi
The definition of international and reserve currency is a common currency unit which is used to
settle and invoice the transaction between the country's issue and other countries or other and other.
There are many benefits to the own country when their currency is used as international and reserve
currency. That is why all countries want their own currency to become common currency. At recent,
Dollar is still using as international and reserve currency; however, many business experts expect
that may be changed in the near future when China's economy is developing fast and becoming the
biggest in 2020. Depending on 'Number One Country, Number one Currency' report, this essay is
trying to answer the question that is does have the change in international and reserve currency and
which currency will become number one?. Firstly, it is summary the china's act for the
internationalization's goal of renminbi. After that, this essay will also give and analyse some need
factors for that internationalization. China must understand there are many challenges when they try
to replace the Dollar by Renminbi in international and reserve currency. But there are many benefits
from using own currency if Renminbi become an international currency. For instance, China can
expand its political effect; furthermore, it helps to reduce cost for domestic firms and households
from foreign currency's risk. It is also a factor helping China in rebalancing economics, reducing the
dependence on the Dollar,

The Growth of China's Economy Essay
Since the reform and opening up, the economy of China grows significantly, as an emerging
economy, China's economy has made tremendous contributions to the global economy, and
Renminbi has become one of the most important currency in the world. According to the survey
conducted by China National Bureau of Statistics found that from 1979 to 2012, China has attained
an annual average growth rate of 9.8% for its national economy, while the annual average growth of
the world economy is only 2.8 % during the same period. In past 30 years, China's GDP surpassed
Japan's, China became the world 's second largest economy, in addition, the huge total volume of
trade makes China become the world 's largest trading nation. The contribution of China's ... Show
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These effective strategies helped Hong Kong overcome the financial crisis. All these facts fully
demonstrated that China is a responsible big country. After the Asia financial crisis, the importance
of China's economy has been brought into focus; China's neighboring countries have begun to
recognize the influence of the Renminbi. 2008 financial crisis caused severe trauma on the world
economy, although the economy of China grew moderately, China 's financial system is very fragile,
the financial laws and regulations are deficient, the structure of foreign change reserve is very risky,
because China has huge foreign exchange reserve of US dollar, which makes China also suffer from
the financial crisis. Financial crisis is caused by the American subprime mortgage, to combat the
financial crisis, the United States issued a substantial amount of U.S. dollars, which makes the U.S.
dollar depreciate continuously, and this action makes many countries that have great amount of
foreign exchange reserves in U.S. dollars suffer huge losses. China has the largest foreign exchange
reserves in the world, in 2008, China's foreign exchange reserves had reached $ 2 trillion, the
continues devaluation of the U.S. dollar make China suffered a lot, thus the international capital
system based on U.S. dollars has been questioned, China and other countries that also hold a huge
amount of U.S. dollars started to build a new international capital structure. In 2011, China, Japan

China Yuan Becoming Reserve Currency
Market Liberalization... with Chinese Characteristics:
Can the Chinese Yuan become a Global Reserve Currency?
Jessica Davis
Fort Hays State University
ECFI 644 International Economics
April 30, 2012
Dr. Dosse Toulaboe
Abstract
China's economy is growing ever larger, but is that enough to get the Chinese Renminbi (more
commonly known as Yuan) to be accepted as a global market currency? This paper will look into the
liberalization, but with Chinese characteristics, of five determining factors in becoming a country
whose currency is a global reserve currency. These factors are as follows: economic size,
macroeconomic policies, flexible exchange rates, financial market development, and finally having
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dollar. In 2005, China announced the move stating it was a move towards allowing the Yuan to
"eventually float freely." However, China still maintained intense government control by
abandoning its peg to the U.S. dollar and simply moving it to link with a handful of other world
currencies (Schuman, 2012).
So while this step may have paved the way towards a floating currency, it was s step taken that also
kept in place a way for tight government control and regulation. Then, in 2008 to help curb the
effects of the global financial crisis, China's economy once again pegged it's currency to the U.S.
dollar. Since, China has removed that peg and in 2010 again announced to the world that is was
committed to resuming reforms of the Yuan exchange rate and increasing currency flexibility (China
Daily, 2010).
It seems that with flexible exchange rates in China, it feels like two steps forward, one step
backwards. While they are indeed moving toward a floating exchange rate, it is a slow going

process filled with exhaustive government control and regulation.
Financial Market Development
Having a relatively liquid market is important for financial market development in order to attract
foreign investors. To broaden the influence and liquidity of the Yuan, China has signed several
(while limited) currency and central bank liquidity swap deals with multiple countries including
Argentina, Belarus, Indonesia, New

Harvard Business Case of International Finance , China to...
China: To Float or Not To Float?
International Finance
Executive Summary
On July 21, 2005, China revalued its decade–long quasi–fixed exchange rate of approximately 8.28
yuan per U.S. dollar by 2.1% to 8.11. Simultaneously, the People's Bank of China announced that
the daily trading band of 0.3% against the dollar would be maintained. Many analysts and
economists believed that the real trade–weighted value of the renminbi was undervalued by up to
30% to 35%.
Companies that produce in China for the overseas market, retailers, and importers clearly benefit
from an undervalued Chinese currency, as well as from the abuse of workers' rights. On the other
hand, companies actually producing in the foreign countries – whether for the ... Show more content
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Impact of growth in China as well as the rest of the world by the changes in exchange rate policy As
most observers took it for granted that the yuan was undervalued, one specific study estimated yuan
undervaluation against the U.S. dollar of at least 35% based on the price level of goods and services
in China compared with those of its trade partners. As a result, there will probably be a sharp
appreciation of renminbi if Chinese government switches over from the fixed exchange rate policy
to flexible exchange rate policy. A common figure cited for a 20 to 25 percent move of renminbi
would be devastating to China, which would cause deflation, cut economic growth, cut off foreign
direct investment and would destabilize Asia. On the other hand, other low–cost countries in Asia
may benefit from the shift of FDI and production of multinational companies. However, most high–
wage countries like U.S. may still face a rising trade deficit because their imports from other low–
wage countries would replace products made in China.
Sustainability of the current exchange rate policy
Many economists – focusing on the strain the tightly managed exchange rate imposed on China's
economy – agreed that China needed to institute more flexibility. They noted that not only was the
exchange rate expensive to sustain, but it contributed – as well as limited China's flexibility in
responding – to a

Module 1 Case Study
Nicole Hancock
Fin501 International Finance
Module 1 Case Study 1
1) Some people are arguing that the Chinese Yuan Renminbi (CNY) could take over the US dollar.
Based on your analysis and findings, will Renminbi replace the US Dollar as the world 's most
popular currencies to hold? Please explain your reasoning. While China is a quickly growing
country and becoming much more important in the global economic realm in my opinion I do not
believe that their currency the Yuan Renminbi will take over the US dollar. While countries are
taking note that China is growing they are now accepting and able to hold renbinbi since August
2010 (Frankel, J. (2011). Some of these countries are Mongolia, Pakistan, Thailand, and Vietnam.
Some of ... Show more content on Helpwriting.net ...
They seem less attractive than hedge funds, mutual funds, etc. Another issue is that with currencies
such as Eurozone.. when things start to look like they are going sour the first thing people do is sell
off their emerging market investments. It's a very violent market to invest in such a risky situation.
Another issue such as emerging markets in China is that the inflation rate is regulated by the
government. It's not necessarily a risky trait to have in n emerging market but it's also harder to
predict a downward spiral as well. It seems as of now investors are better off in more traditional
currencies. With the Erozone for example it seemed like a great idea but when things go bad people
aren't comfortable holding on to assets that they aren't familiar with or comfortable with.
5) Based on your analysis and findings, what would you recommend to international market
currency investors? If you don't have the money to invest, don't. If it's an investment that you are
looking for a quick return and are able to lose the capital you put in then I say go for it. If you are
investing for something such as a college fund or retirement fund then an emerging market isn't for
you. The emerging market game is something risky and uncertain... it needs to remain an option for
people who have the ability to ride it out or lose.
6) What do you perceive you have learnt in Module 1 Case Assignment? Please provide your
evaluation of the Module 1 Case Assignment in

Trade
China and the United States
Jimmy Thompson
ECO 372
October 31, 2012
Douglas Holbrook
China and the United States The United States would not be the country it is today without its major
trade partners. International trades make up a large part of China's economy, which is the same for
the U.S. Both the United States and China share similar structures as far as the market system
orientation of trade and economic systems. It is important that China and the United States work
together to help the countries strengthen its economic state. China's Economic Background China is
proving to be one the fastest growing, major economies in the world, perhaps even the most
dynamic. Since the country ... Show more content on Helpwriting.net ...
Some examples of popular imports are electrical machinery, toys and sports equipment, furniture
and bedding, clothing/footwear, processed fruit and vegetables, juices, snack foods and spices.
Currency Exchange Rate The current currency exchange rate from the Chinese Yuan Renminbi to a
U.S. dollar is 0.160135 U.S. Dollar; therefore, one U.S. dollar equals 6.24472 CNY. Since America
does so much trading and business with China, they are extremely attractive to us as a partner of
trade. China has purposely kept their currency weak to continue the business they receive from the
United States. Big Mac Index In Accordance to the Big Mac Index, if the Citizens of the United
States were to travel to China, they would be able to spend less US dollars since Chinese currency is
very weak, thus making China very affordable for Americans. Since China has continually
weakened their currency in order to remain an attractive trade partner with the United States, it has
allowed Americans to travel to China knowing they can get more for their money. In other countries,
such as the UK, it would be much more expensive for Americans to travel, as their currency is
stronger. Affects of 40% Tariff on Main Export If the United States were to impose a 40% tariff on
aircraft, which mainly is constructed here in Washington State, it would surely cause hardship on
China. In recent years, China has

Central Bank Government Of China
In 2005, Zhou Xiaochuan, the Central Bank Government of China who has been in power for the
past 13 years, announced that the Renminbi would switch exchange rate regimes and would begin to
follow a more flexible regime that was tied to a basket of different currencies. Prior to this new
change, the Chinese yuan was strictly pegged to the US dollar, which helped them thrive
economically in the global market. Less than a decade before the exchange rate regime was
changed, the Asian financial crisis occurred and many East Asian countries were impacted.
Compared to its neighboring countries, China was not impacted as badly as other countries,
therefore it continued to stay afloat during this difficult period of time and continued after the ...
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Asian Financial Crisis The Asian Financial Crisis, that began in the middle of 1997, was a surprise
to many. It all started when Thailand had a financial crisis which ended up spreading to its
neighboring Southeast Asian countries. This mass spread was largely due to the intense devaluation
of currencies in Asia . The crisis caused mass capital outflows and investor flight because investors
lost confidence in the financial systems in many of those countries. Although it started out being
contained in Thailand, it spread to other East Asian countries and ended up impacting Malaysia,
Indonesia, the Philippines, South Korea, Hong Kong, and China. Consequently, the lack of investor
confidence caused the international stock markets suffered from this crisis, which also impacted
other countries that reside outside of the Asian continent. During the crisis, the greatest issues that
China faced were a decrease in income level, many of its companies went under, and there was
tremendous pressure on the yuan to devalue (Yongding, 164). The Chinese government at this time
had concluded that being pegged to the US dollar at a market exchange rate that equaled about 1
USD= 8.28RMB was the best chance they had to keep the yuan stable (Frankel and Shang Jin, 595).
The stability that the US dollar was able to provide the Chinese yuan helped the issues it was facing
not become even bigger ones. If the Chinese yuan had devalued more than it

Chinese Monetary And Fiscal Policies
It is important to understand the Chinese Yuan 's prediction and impacts since this second world
leading economy can influence global economic issues through changes in its currency's value. In
order to forecast the future of Renminbi, it is essential to understand the past and current issues that
affect its value. Throughout the essay, the definition of Chinese exchange rate will meant by the
value of the Renminbi against the US dollar.There are many factors that could affect the value of the
Chinese Yuan, but mostly through the power of the regulatory system. This essay will explain the
Chinese monetary and fiscal policies that China has recently used with the description of how these
regulations could determine its exchange rate within the short–term. Furthermore, this essay will
wrap up with a discussion of ideas and thoughts about the prediction of the Renminbi in the long–
run after the exciting news of being included in the reserve currency basket in late 2015.
One of China's main economic objectives is to move from export–led growth to a more sustainable
driven growth – domestic consumption. In order to achieve this, the government has made many
changes in the economic regulation, especially the monetary policy. The monetary policy is mainly
referred to decisions of the money supply's size and growth rate within the economy, that are made
by the central bank or other regulatory authorities. In March 2016, Chinese bank's reserve
requirement has dropped another 0.5%

The Challenges of the Dollar Being an Intenational Reserve...
The U.S. dollar index has exhibited a clear long–term downward trend since 2002. This is a cause
for concern among emerging markets because a large proportion of their foreign exchange reserves
is held in dollar denominated assets. The dollar accounts for 62 percent of allocated foreign
exchange reserves around the world and for 58 percent of the allocated reserves of emerging and
developing economies . Most central banks would incur considerable losses on their investments if
the depreciation of the dollar continues in the future. Even if the depreciation of the dollar does not
impact the attractiveness of U.S. securities now, it poses a significant challenge to the "exorbitant
privilege" of the dollar as an international reserve and investment currency.
In the aftermath of the financial crisis and due to fears that the dollar might lose its predominant
status, the search for alternative currencies has intensified. Although it is improbable that a shift
from the dollar will happen in the near future, private investors and central bankers have highlighted
the need for portfolio diversification towards alternative currencies. In the first quarter of 2013,
about 94 percent of allocated foreign exchange reserves comprised of holdings in the 5 traditional
reserve currencies: dollar, euro, pound sterling, Swiss francs, and Japanese yen. On the other hand,
other currencies accounted for just 6 percent of allocated foreign exchange reserves . Besides the
emerging market currencies

An Argument Against Citigroup in China Essay
An Argument Against Citigroup in China Chinese regulations have historically limited the
operations of foreign banks, but with the entry of China into the World Trade Organization (WTO),
that is all slated to change– in theory. Geographic limitations for foreign banks are to be lifted by
December 2006, along with a host of other restrictions that have retarded the growth of Western
banks and the Chinese banking sector as a ... Show more content on Helpwriting.net ...
In addition to regulatory problems, Citibank is facing serious problems in its own approach to
strategy in China. It had initially been aggressive in pursuing every opportunity to buy into Chinese
domestic firms as a way to gain an advantage on its foreign competitors. This strategy hadn't
produced the results that had been expected. While the Chinese economy is booming at the moment,
it is far from stable. Any economy that experiences growth like China has will be more vulnerable to
global economic conditions, and the developing nature of China's market means this is even more of
a truth. Questions about the long–term stability and viability of the Communist regime will always
top the list of risks of doing business in China, but there are specific problems with the banking
sector that concern Citibank. The legacy of policy banking has created an environment that lacks a
culture of lending accountability. Currently Citigroup is not doing well in dealing with the following
issues. • Non–performing loans– The Communist system of awarding loans to state owned
enterprises, whether they are profitable or not, has lasted until the present day and has saddled these
banks with an unwieldy percentage of

China 's World 's Elite Currency
Chinese Ren Min Bi has become one of the world's elite currency. On Monday, November 31, 2015,
The International Monetary Fund has approved China 's yuan into its elite reserve currency. As this
decision announced, it will impact China's economy. This new policy will help pave the way for
broader use of the renminbi in trade and finance, securing China's standing as a global economic
power, just like four other currencies – the US dollar, the European euro, the English pound and the
Japanese yen.
Yuan become international currency. What the impact to the other country, such as Indonesia as
developing country? Nowadays, everyone knew that US Dollar is common currency that use for
international currency, and usually use it for market ... Show more content on Helpwriting.net ...
Firstly, the dominance of the US dollar as an international currency to be more reduced. Chinese
government believes that the positive effect will be felt by the country 's currency if the yuan
becomes number one in the world, one of which is able to weaken the hegemony of the US dollar as
global reserve currency. It also increases the importance of China in global financial markets. The
impact could be felt at least in the near future, in the third quarter of 2016. In Indonesia, on the last
few years, people can put their assets in bank by using US Dollar, but in the next few year, it cannot
be denied if people can put Ren Min Bi as their assets, because Ren Min Bi exchange rate is cheaper
and friendly than US Dollar.
Secondly, the demand for renminbi asssets could be increased. The inclusion of the yuan also
potentially provide a shift in asset demand for renminbi, it is predicted will take place in the short
term in the capital market. However, the inclusion of the Ren Min Bi as a global reserve currency
that could have a significant impact on profit credit.
Moreover, Indonesia will be dependence on declining US dollar. The positive impact of reducing
Indonesia 's dependence on the US dollar, if the bilateral swap effectively and cost of fund in
market. Then it will give a tremendous impact of changes in economic conditions that exist in
Indonesia later. So, Indonesia will be able

Essay on China’s Renminbi: “Our Currency, Your Problem”
China's Renminbi: "Our Currency, Your Problem"
Our Currency, Your Problem is a case involving the issue of exchange rate regimes and the impact
currency manipulation has on economies and trade. The United States and Europe argued that the
Renminbi (RMB) was undervalued and claimed that the People's Bank of China (PBoC)
deliberately manipulated the exchange rate to lower the prices of exports, which caused the US and
Europe to run huge trade deficits with China.
The US and Europe felt that the RMB was undervalued for several reasons. One reason is that
China's exports had dramatically increased, growing 30% from 2004 to 2005, making China the
third largest exporter in the world and accounting for ... Show more content on Helpwriting.net ...
A fixed exchange rate regime will offer an economy greater stability in international prices and
therefore encourage trade. Additionally, for developing countries a fixed rate will assist in
promoting institutional discipline as the country will adopt restrictive monetary and fiscal policies
that foster an anti–inflationary environment. A significant weakness of a fixed rate is that it is
subject to destabilizing speculative attacks which could lead to financial meltdowns and devastating
economic contractions. A floating exchange rate regime allows central banks to combat
macroeconomic factors such as unemployment, inflation, and interest rates without having to worry
about the effect on exchange rates. However, developing countries whose economies depend on
trade will be reluctant to allow their exchange rates to fluctuate freely.
In 1994 the Chinese government made the decision to peg the RMB to the US dollar at a rate of
US$1 to RMB8.7, a year later the Renminbi appreciated 5% and was revalued to RMB8.28. This
rate would remain unchanged for the next 10 years, even though the Chinese faced heavy scrutiny
and pressure to revalue their currency. The Chinese exercised many policies in maintaining their
exchange rate. The PBoC controlled the amount of foreign currency by forcing all exporters to
immediately sell their foreign currency to designated banks. The RMB could only be traded on the
China Foreign Exchange Rate

Case Study 1: The Yuan Goes Global
Mini Case Study 1: The Yuan Goes Global 1) How does the Chinese government limit the use of the
Chinese currency, the RMB, on the global currency markets? Chinese government limit the use of
RMB on the global currency markets through closely controlling the trading in the RMB such as
setting rules and regulations to being followed. All the transactions happen in China are only
allowed to be conducted if one follow the regulation set by the Chinese government include using of
U.S. dollars in the trading. Moreover, the currency used to settle the trade transactions for instance
Chinese exporters, is normally paid in U.S. dollars. This is because the Chinese government forbid
the use of Chinese currency, RMB for trading transactions between China and foreign ... Show more
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As a result, all the profits earned by the Chinese exporters are to be hand over to Chinese
government. This also result to restriction of flow of RMB out of China as we know that China is
the second largest economy in the world that many transactions are occurred daily between China
and other foreign countries. Thus, it is important to restrict the large amount of RMB flowing
outside of China. Other than that, the Chinese government has launch a gradual policy of
developing the transaction in the RMB as China want to find a way to prohibit people who desire to
get the RMB being freely traded. Thus, Chinese government choose to develop this policy through
its onshore offshore market, Hong Kong. In Hong Kong, they have their own currency named Hong
Kong dollar (HKD), being floating against the global currencies. However, through the policy
adopted by Chinese government, Hong Kong's people are able to hold RMB in either cash or in
bank deposits, and their maximum daily transfer are just RMB 20,000. There is also limited trading
in Hong Kong. The main purpose China do this policy is because of avoiding RMB flowing out of
China but at the same time let the

A Brief Report On Tianjin Plastics Essay
Tianjin Plastics were undertaken as project finance ventures. Project financing is a way in which
large standalone investments may be financed from their own assets and cash flows, without
recourse from the assets of the equity holders themselves. Project financing is the primary method
was taking for the massive infrastructure investment throughout many places such as China,
Malaysia, Indonesia, the Philippines, India, Bangladesh, Pakistan, and other emerging economies.
However, despite that the complexity of project finance (because they were detailed agreements that
require thousands of pages of documentation), was extremely uncomfortable with the problems
posed by the Tianjin proposal.
Political:
In the past three decades, project finance has contained some of the largest individual investments,
including: British Petroleum's financing of its interests in the North Sea (totaling $972 million in
1972); the Trans–Alaska Pipeline, a joint venture between Standard Oil of Ohio, Atlantic Richfield,
Exxon, British Petroleum, Mobil Oil, Phillips Petroleum, Union Oil, and Amerada Hess (1978).
Each of these investments represent capital expenditures that exceed the ability of a single firm to
finance. However, through a joint venture arrangement, the higher risks more than normal that
absorbed by the capital employed could be managed.
Legal:
The China project was established as an individual legal entity, and it separates from the legal and
financial responsibilities of its

A Brief Country Risk Assessment
Risk Management Application
Develop a Brief Country Risk Assessment Determining the most important factors to consider when
doing business in China can be tricky. There are a number of things to consider starting with the
Chinese culture. Chinese expect foreign businesses to be sensitive to their culture. They do not
expect them to be fluent in the Mandarin language but they are more open to those who try. Chinese
people are very are very loyal to their families and place high value on their history. Relationships
take very high priority when attempting to forge new ventures in China. The Chinese are protective
of their culture and work hard to maintain it's integrity; therefore, they expect to take as much time
that is needed to ... Show more content on Helpwriting.net ...
The Chinese government is highly involved in business practices, unlike the American government.
Their government plans China's economy; therefore, it can be difficult for Americans and other
foreigners to understand and work with them. Those making major business decisions need to
understand Chinese government regulation and involvement in business practices. Chinese law
lacks consistency and the their government has the right to change the standards at anytime without
notice. Property rights and intellectual property rights are vague and can also be changed at the will
of the Chinese government. Any contracts that take place between Chinese and foreign
governments, to include, the United States can easily be cancelled or changed. When contracts are
implemented in China the Chinese have control over the assets and ownership of the joint venture.
The Chinese negotiators take their time when making business decisions. They are not quick to
come to an agreement in joint ventures; this is very different that the American way of doing
business. It is essential that Costco takes their time to research all their options and strategize an
effective business plan that will enable them to do business in China while mitigating the risks of
losing control over their assets and ethical business practices as a result of doing business in China.
China is petting the Yuan After years of keeping the Yuan pegged to the US

An Analysis of the U.S. Dollar Depreciation: Whether It Is...
1. Introduction Under the environment of the Global Financial Crisis (GFC), the financial markets
had a severe impingement, especially the influences to the American financial market. Meanwhile,
as one of the largest American 'trading partners', the third largest 'export market', China offers USA
a majority of imports and keeps close trade relation with USA (Morrison, 2011, pp2–6). It can be
seen that the changes of U.S. dollar might affect the Chinese economy. In order to keep sustainable
development, the Chinese government focuses on the influences of U.S. dollar alteration and
considers whether it is beneficial to Chinese economy. Since 2008, U.S. dollar depreciation brings
China plenty of benefits, whereas there still have a few ... Show more content on Helpwriting.net ...
For example, Chinese passengers may own more extra money for outbound tourism and shopping,
which may reduce their cost of travel abroad and shopping than before, especially travel to America.
The third one is to expand usage of foreign capital holdings. U.S. dollar devaluation motivates
foreign capital flow into Chinese markets. There is a graph about China's official foreign exchange
reserves (1985–2006). Table China's official foreign exchange reserves (1985–2006) Source:
National Bureau of Statistics of China (2007). The graph describes the foreign exchange reserves in
China which expressed a dramatic increase between 1985 and 2006. Due to the Chinese economy
development, an increasing number of foreign investments are keen to enter the Chinese capital
market. Moreover, a significant number of Chinese corporations would gain more opportunities to
cooperate with foreign companies and learn from each other. It also provides them enough foreign
capital to invest in the international markets. But a large amount of foreign capital holding flow into
China that may pose threat to domestic companies, namely the foreign companies may rob the
domestic companies' market share for their future development. So the Chinese government may
consider building a security limitation of foreign exchange reserves. 4. Disadvantages of U.S. dollar
devaluation to Chinese economy In fact, owing to the friendly trade

The Political System Of China
History The United States and China have a long history when it comes to how they settled
developed International Trade Agreements. Back in 1844 the first treaty was established for open
ports for trader which allowed the United States to begin to trade with China. The United States
started to bring in goods, these goods consisted of: coins; ginseng; furs. The most prominently were
cotton, silk, porcelain, and lacquerware. Up until the modern Free Trade Agreement we have today,
there were several iterations from 1844 until now that restricted or expanded trade between the
United States and China.
The difference between the political system of China and the United States in relation to
International Trade. China's political system which ... Show more content on Helpwriting.net ...
The American economy is based on a Market Economy. A Market Economy" is where economic
decisions are made by the free market".( (Kimberly Amadeo,2014) .When it comes to foreign trade
the United States government allows other countries to import goods into the country, we export
many goods to other countries with the government only imposing tariffs, but not much other
intervention.
Ethical norms between China and the United States. " Every culture and nation has its own values,
history, customs and traditions, thus it has developed own ethical values and understanding of
ethical principles; There is no international ethical code of conduct, accepted and followed by all the
countries; There is a lack of governments' initiative to create ethical cooperation framework and
thus to enhance ethical behavior in international business; It is hard to outline those ethical values
which would be understandable, acceptable and important for representatives of all the continents
simultaneously within different types of international cooperation projects". ( carlo scevola, mba,
1995–2015) China's ethical norms would consist of shaming, a white lie is not frowned upon to save
someone's shaming. Another important norm in China is one must have the correct authority also
known as "Guanxi". Foreign countries need to keep these norms in the front of their minds when
trading with China. In the United States the ethical

Introduction. In A Recent Article, New York Times Writer
Introduction
In a recent article, New York Times writer Eduardo Porter argues that Trump made the right
decision in not naming China as a currency manipulator, but also argues that China practiced this in
the past to the detriment of the U.S. economy. There are three criteria for a country to be considered
as a currency manipulator, and China only follows one: "It must have a significant surplus with the
United States." This surplus is large at $350 billion, but with the rest of the world it's only 2.4% of
China's GDP.
Therefore, the majority of economists no longer consider China to be a currency manipulator. But in
the past, China did fit this criteria. From 2000 to 2014, China suppressed its currency in order to
increase the demand for ... Show more content on Helpwriting.net ...
Theory Review and Analysis
A country intentionally lowering the value of its currency may not seem like it would be beneficial
to the country's economy, but this practice does in fact have its advantages, which is why some
countries have used it. To do this, a country, for example China, would overprint its own currency
and then use that currency to buy U.S. dollars, which decreases the amount of U.S. dollars. This
means there is more of China's currency, the renminbi, relative to U.S. dollars. With more of China's
currency in the market, the renminbi's worth decreases (Forbes article). With China's currency worth
less, Chinese goods are cheaper, so the U.S. and other countries' demand for exports from this
country increases. This demand in exports helps China's economy grow. This is overall consistent
with what we talked about in class and with economic law in general: an increase in the price level
will increase aggregate demand for goods and services (Mankiw 20–3). According to Chapter 19,
section 19–3c of the textbook, a country's currency can also weaken in foreign exchange markets
when the country sees an increase in capital outflow. This is because the outflow becomes inflow in
another country, say, the United States, and this increase in inflow strengthens the

The Cultural Clash Between Putzmeister From Germany And...
When using Hofstede, it becomes apparent that the two cultures differ regarding individualism,
uncertainty avoidance and power distance. The scores indicate that Germans are individualistic and
ambitious. They also want to control the future and they prefer egalitarian structures. Contrarily, the
Chinese have a comparable profile, except, they are group–oriented, they accept an unpredictable
future and they prefer hierarchies (("Germany in comparison with China," n.d.).
These differences indicate a potential cultural clash between Putzmeister from Germany and Sany
from China. For example, Germans might want to plan future business actions while the Chinese
would not understand this behaviour because to them the future is uncontrollable. ... Show more
Another example are the opposing values of equality and respect for authority which mirror the
different degrees of power distance mentioned earlier. German subordinates would speak up if they
can contribute expertise to a discussion. For the Chinese, this would be unthinkable since they
highly respect their superiors.
These and other behaviours are the reason why Putzmeister can be classified as a role or Eiffel
tower culture and Sany as a power or family culture (Harrison, 1972; Trompenaars, 2011). This
categorization is illustrated below
This illustration displays the immense cultural distance between the two companies (Liu & Chen,
2015) and the potential for a cultural clash, just like the national cultures.
This distance seems to be the reason why Sany tried to preserve the cultures of both firms (Copley,
2016) and limit the cultural integration to strategic cooperation (Klooß, 2013). This approach is
aligned with academia suggesting that it is vital for successful Chinese–European M&A's to keep
the European subsidiary intact to preserve motivation (Chen, Werle, & Moser, 2016). Indeed, the
acquisition of Putzmeister by Sany shows that cultural distance can be a chance (Liu & Chen, 2015)
and this might have made this partnership a success (Copley, 2016).
4.0 Question 4
As discussed in section two, cross–border acquisitions like Sany's can be subject to currency risk. To
determine

Central Bank Government Of China
Introduction In 2005, Zhou Xiaochuan, the Central Bank Government of China who has been in
power for the past 13 years, announced that the Renminbi would switch exchange rate regimes and
would begin to follow a more flexible regime that was tied to a basket of different currencies. Prior
to this new change, the Chinese yuan was strictly pegged to the US dollar which helped them thrive
economically in the global market. Less than a decade before the exchange rate regime was
changed, the Asian financial crisis occurred and many East Asian countries were impacted.
Compared to its neighboring countries, China was not impacted as badly as other countries,
therefore it continued to stay afloat during this difficult period of time and continued ... Show more
Asian Financial Crisis The Asian Financial Crisis, that began in the middle of 1997, was a surprise
to many. It all started when Thailand had a financial crisis which ended up spreading to its
neighboring Southeast Asian countries. This mass spread was largely due to the intense devaluation
of currencies in Asia . The crisis caused mass capital outflows and investor flight because investors
lost confidence in the financial systems in many of thOSE countries. Although it started out being
contained in Thailand, it spread to other east Asian countries and ended up impacting Malaysia,
Indonesia, the Philippines, South Korea, Hong Kong, and China. Consequently, the lack of investor
confidence caused the international stock markets suffered from this crisis which also impacted
other countries that reside outside of the Asian continent. During the crisis, the greatest issues that
China faced were a decrease in income level, many of its companies went under, and there was
tremendous pressure of the yuan to devalue (Yongding, 164). The Chinese government at this time
had concluded that being pegged to the US dollar at a market exchange rate that equaled about 1
USD= 8.28RMB was the best chance they had to keep the yuan stable (Frankel and Shang Jin, 595).
The stability that the US dollar was able to provide the Chinese yuan helped the issues it was facing
not become even bigger ones. If the Chinese yuan had devalued more

United States : Interest Rate Hike
UNITED STATES: Interest rate hike UNITED STATES: Interest rate hike grows in uncertainty US
interest rate hike grows in uncertainty Global volatility may delay the pace of the Federal Reserve 's
normalisation of monetary policy EVENT The Federal Open Market Committee (FOMC) of the
Federal Reserve (Fed) meets on September 16 and 17, in what will be one of the most awaited
meetings in recent years. SIGNIFICANCE The chance of a rates lift–off at this meeting has receded
recently and currently stands at 32%, as anticipated by the Fed Funds futures ***THIS SHOULD
BE CHECKED DAY OF BY APPROVER OR FRANCESCA*****, due to heightened financial
markets volatility and global economic sluggishness. The chances of a December hike are higher, ...
Meanwhile, the FOMC will have more time to assess whether the factors that have held back
inflation, the strong dollar and low oil prices, are fading. Analysis Early this year, GDP growth
stagnated because of transitory factors (harsh winter weather and the West Coast ports disruption)
and inflation declined due to the dollar appreciation and a fall in the oil price (see DB198755). For
most of the year, the dominant view within the FOMC members has been that the slowdown in both
growth and inflation was temporary and that it would fade away as the year progressed. CALLOUT:
3.7% Annualised second–quarter real GDP growth This prediction proved right for growth, as
second–quarter GDP growth rebounded to 3.7%
[http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm]. However, inflation has stayed
low. The July FOMC minutes
[http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20150729.pdf] first raised doubts
about this view, highlighting how the recovery might be incomplete, due to slowing global growth,
while financial conditions have tightened due to the China–led equity sell–off. At that meeting,
almost all members would need more evidence to be reasonably confident in the inflation outlook's
improvement. [***US_GDP_chart***] Recent developments – h2 In August, a major global event
clouded the outlook further: the People 's Bank of China (PBoC) introduced changes to the renminbi

The Us and China “a Marriage Made in Renminbi-Yuan”
Stephanie Wicks–Franklin
International Economics Research Paper
Instructor Stephen L. Crain
Wednesday, August 23, 2014
The US and China "A Marriage Made in Renminbi–Yuan"
The United States presently in a tightly knit and powerful economic relationship with China. Reason
being the US economy depends heavily on foreign capital, in particular the Renminbi–Yuan.
According the US Treasury report as of September 21, 2014 the total debt for the United States was
at a staggering $17,752,082,587,972.00, this is almost eighteen trillion dollars. With foreign
governments and investors holding roughly half of it and China's holds the largest portion thereof at
$1.268 trillion, which is only slightly down from $1.279 trillion in 2013. ... Show more content on
Helpwriting.net ...
Collectively, they employ more than 70,000 Americans, up from virtually none a decade ago
(Wiseman).
Chinese investors have other projects that are creating jobs in the United States; for example Fuyao
Glass Industry Group Co. recently purchased an Ohio plant abandoned in 2008 by General Motors .
This acquisition is rumored to create a minimum of 800 jobs. Consequently this particular purchase
puts Fuyao within a four hour drive of additional auto plants in Kentucky and Indiana
Chinese textile manufacturer Keer Group is investing $218 million in a plant to make industrial yarn
In Lancaster County, South Carolina, which will employ 500. South Carolinas government help seal
the deal by offering the company a $4 million grant.
Tianjin Pipe is investing over $1 billion in Gregory, Texas, in a factory that makes pipes for oil and
gas drillers. The company expects to begin production late this year or early in 2015. It will have 50
to 70 employees by the end of this year and 400 to 500 by the end of 2017.
The United States and China have been in a long–term lop–sided relationship where China makes
things and America buys them. At least this this relationship is becoming a little more reciprocal by
moving in the direction of the United States.
There are some powerful forces at work assisting this trend which is not limited to but include
contracting wage gaps, reduced U.S. energy

Rmb Appreciation Positive Impact on China’s Economy and...
The appreciation of the RMB issue has attracted attention of various circles at home and abroad. By
analyzing the current RMB exchange rate appreciation on China's economic impact at all levels, I
will mainly from the industrial structure, export structure, and enterprises to change their
operational mechanism, to ease trade tensions and the effectiveness of monetary policy five–
pronged approach to analysis; and my final conclusion: RMB exchange–rate appreciation generated
by the final result is more positive than negative, impact is positive. In the current context of the
appreciation has become a fact, china should actively take the appropriate follow–up measures to
stabilize and optimize the economic environment, to minimize possible ... Show more content on
Helpwriting.net ...
In the 11 years, the international economic situation has undergone great changes; pegging the RMB
exchange rate formation mechanism type has become increasingly unsuited to China 's economic
reform and development requirements. It is demonstrated by the defects are:
First, the fixed nominal exchange rate has lost its real economic significance, the current RMB
exchange rate formation mechanism is difficult to form market–clearing equilibrium rate. Practice,
exchange settlement and capital management system in suppressing demand for foreign exchange at
the same time creating a large part of foreign exchange supply, the central bank continued to
intervene and the fact that the position of the largest market makers, erase all the differences
between actual supply and demand. The central bank 's benchmark rate to determine the true market
supply and demand balance is not the result can not reflect the market changes.
Secondly, the fixed dollar–pegged exchange rate system and monetary policy, the independence of
the existence of a fundamental conflict, undermine the effectiveness of monetary policy cannot meet
the needs of economic development. Monetary policy autonomy is essential for China's
macroeconomic stability; monetary policy should take precedence over the independence of
significant exchange rate stability. But the Yuan against the U.S. dollar exchange

Ubcj Pros And Cons
The UBCJA supports issues that will increase worker rights as well as the quality of life of its
members. One of the cores issues of the UBCJA issues is wage–and–hour laws. Since its founding,
the UBCJA has worked for fair hours and fair pay. Part of this is prevailing wage laws which
encompass an hourly wage as well as benefits and overtime. The UBCJA supports laws concerning
wage laws because it prevents employers taking advantage of its members and ensures that their
members are adequately compensated for their work. They also support more welfare reform. The
UBCJA calls for proper payment of welfare plans for multiple–employer workers. These workers
often will not receive proper welfare because their employers aren't willing to pay due ... Show
The UBCJA voices concern with trade relations with China. The UBCJA opposes the relations as
they feel they are unfair and lead to the loss of millions of United State jobs every year. President
McCarron stated, "hurt every member of our union and every worker in the United States. The
current economic downturn has only made those effects worse," ("Chinese Policies"). The UBCJA
object particular to apparent currency manipulation. The UBCJA believes that the Chinse Currency,
the renminbi, is inflexible and doesn't increase in correlation to the increase of exported goods. They
estimate the renminbi inflation to be worth up to 40% more than it actually is. This stance was
written after the UBCJA attended a panel of the Economic Policy Institution in 2010. Robert E.
Scott, an economists for the Economic Policy Institution and author of a paper concerning currency
manipulation, commended UBCJA concern over trade relations and stated, "The U.S. government
needs to know that its citizens understand this issue and are prepared to take action at the ballot box
if this job–stealing situation isn't addressed" ("Chinese Polices"). The UBCJA is fighting against
trade policies that hinder the opportunities of American

Globalisation On Chin The Influence Of Globalization In China
Introduction: Globalisation is the increasing level of integration between countries facilitated
through the liberalisation of trade. The term globalisation is also used to outline the shift from the
confines of national boundaries to encompass the world as a whole. Economic growth is change in
gross domestic products (GDP) produced by an economy over a period of time. While economic
development is a measure of welfare in a nation and the process of structural changes. Indicators
that highlights the changes in economic development includes; education, health, standard of living
and extent of poverty. The influence of globalisation on China is seen in its change in trade of goods
and services, financial globalisation and improvement in technology, transport and communications.
China has taken this opportunity to increase their economic growth and development through
various strategies. Evident in their "Open Door" policy, the membership of the World Trade
Organisation (WTO) and the revaluation of the renminbi (RMB). "Open Door" Policy: The "Open
Door Policy" created in 1978, implemented by Deng Xiaoping embraced the benefits of
globalisation in the aspect of improvement in technology, transport and communication. This
opened doors for foreign businesses and fulfilled China's need for Western technology and
investment, with the purpose of encouraging foreign participation in China's economic
development. The policy established four Special Economic Zones (SEZs) in Southern

China 's Trade Imbalance With A Firm Level Data Set...
Measuring the magnitude of exchange rate pass–through for Chinese exports is all the more relevant
because China's trade imbalance with richer trading partners, notably the United States, is often
perceived as exacerbated by exchange rate manipulations. Many indeed argue that an appreciation
of the renminbi would help rebalance China's trade. While the RMB was pegged to the U.S. dollar
until July 2005, Tang and Zhang (2014) noted that there were significant fluctuations in real terms
from an appreciation of 9% from 2000 to 2001 to a depreciation of 17% from early 2005. The extent
of its trade's response to a change in the exchange rate however depends on the magnitude of the
ERPT and on the price elasticity of Chinese exports and imports. ... Show more content on
Helpwriting.net ...
They also find that the reaction of the Chinese exporting firms depends on their productivity levels:
high–productivity firms tend to adjust their export prices, while low–productivity firms tend to
adjust their export volumes. Héricourt and Poncet (2015) also find that exchange rate volatility
reduces a firm's decision to export and the value of these exports, but that these negative impacts
can be mitigated with the existence to well–developed financial markets.
Our paper contributes to the literature on ERPT for Chinese exports by testing for heterogeneity in
Chinese firms' responses to changes in exchange rate. The main data source is a database collected
by the Chinese Customs. It contains Chinese firm–level export flows by year, product, custom
regime, firm type, and destination country, over the years 2000–2006. One distinctive characteristic
of China's trade lies in the importance of processing trade in total exports. From 2000 to 2006 the
share of processing trade in total export exceeded 50%.
Using micro–level data allows us to circumvent some empirical issues one would face when
estimating the ERPT with aggregate price data . First, we can treat changes in the exchange rate as
exogenous (Feinberg, 1996). Second, using aggregate price indices to measure ERPT might lead to
some bias in the estimation, as prices of many goods do not change during these goods' lifetime.
Kim et al. (2013) indeed

The Impact Of International Bond Markets On Banking Sector...
Britain's banks were underperformed and was ranked among the most unprofitable banking industry
among the world. However, the delayed recovery was due to more strict regulation in banking sector
and the higher level of monitoring. The overall banking ethic has been improved after the financial
shock as banking industry shoulder the responsibility of the economic recovery by taking the bank
levy. Even though the pace is slow, every improvement has been built up stubbornly. The British
capital market is still highly dynamic, the investors would recognise the opportunity once the
industry start to recover and boost the race of restore.
Financial institutions participating in the international bond markets have numerous rewarding
benefits ... Show more content on Helpwriting.net ...
It is inherently difficult to predict the timing and intensity of a systemic banking crisis. Therefore,
informs our strictly ordinal definition of credit quality. It is not the absolute (cardinal) level of
default risk that matters, but rather the rank–order of default risk among all banks. In order to reduce
the cost of processing bank accounting information, banks' public reporting requirements should be
vastly enhanced to facilitate cheaper and better credit analysis. In most countries, bank regulators
protect their privileged data access, and do not share crucial bank data publicly (or even with other
bank regulators) in a narrow pursuit of their own agency power and to shield themselves from
accountability. Future bank regulation therefore needs to create an entirely new information
environment for external credit analysis. Better public information and more bank reporting is the
best strategy to reduce the exorbitant influence of credit rating agencies in the current system.
In conclusion, while CDOs are providing liquidity to financial institutions, the credit level should be
monitored and the value of the related product needs to be evaluated and updated on a timely basis
in order to minimize the threat of asset bubble. The level of using CDO as a finance method should
be controlled as it would have a negative influence on the ability to re–acquire loans. Also, the risk
of

Essay on Currency: What is Exchange Rate?
Exchange rate represents the external value of a currency. Changes in exchange rates may affect the
relative position of a country in the international trade. Politicians and economists concern about
exchange rate variability for lots of reasons, among which that the exchange rate variability
discourages trade comes first. However, a large empirical literature on this issue does not confirm a
significant effect of exchange rate on the volume of trade [1]. Instead other variables such as
employment should be much more important from a practical point of view, for it is closely related
to people's livelihood.
With China's deepening Opening Up and economic restructure adjustment and the continuous
appreciation of RMB in recent years, the ... Show more content on Helpwriting.net ...
The second channel points to the influence of the real effective exchange rate on the economic
growth rate and on the rate of job creation in the long run. Through the last channel, the real
effective exchange rate affects employment by influencing the labor intensity of industries.
Li Tiandong and Jiang Boke (2006) point out that the relationship between exchange rate and
employment depends on the coaction of three mechanisms: (1) the effect of exchange rate changes
on aggregate demand; (2) the effect of exchange rate changes on prices of capital goods; (3) the
substitution effect of exchange rate changes on the relationship between physical and human capital.
[4]
1.2.2 Review of empirical researches
Many other academics have attempted to do empirical studies to confirm that there is really a force
that exchange rate has driving the (un–) employment level to correspond to the changes.
Starting from the "option value of waiting" to create a job and taking the bargaining position of
workers, reservation wage into account, Belk and Gros (2002) find the link between exchange
variability and employment stronger in most European countries than in the US. [4]From the
industry point of view, the impact of exchange rate movements on

The Legal Tender Of The People 's Republic Of China
Renminbi (RMB) is the legal tender of the People's Republic of China. The trade of RMB is
booming internationally. It is now the ninth most traded currency in the world account for 2.2% of
total foreign exchange turnover. In 2004, Hong Kong residents are allowed to deposit Renminbi into
their bank account up to 20000 yuan per day (2100 pounds). In 2007, the first Renminbi
denominated bond is issued in Hong Kong, called the dim sum bond. In the end of 2008, China
allowed the trade using RMB between ASEAN countries (Association of Southeast Asian Nations:
Indonesia, Malaysia, Singapore, Philippines, and Thailand) and Hong Kong, Macau, Guang Dong.
Later Shanghai and other cities were included. In 2009, China signed direct swap deal with
numerous countries including UK, Canada, and Iceland. In 2015, Renminbi is included in IMF's
SDR basket.
CNY and CNH: The same currency traded in or outside of mainland China
A little background of CNY and CNH. Both of them are the same currency called Renminbi as
stated above. They are both the legal tender of China and their unit is 'Yuan' (like pounds). The
differences are that CNY is only traded in mainland China, and one can only trade within a limited
amount of CNY against other currencies. CNH, on the other hand, is traded outside of mainland
China such as Hong Kong and London. There is no limited of how much CNH you can traded in a
specific period and can fluctuate freely without any government control. As a result, the exchange
rate

Tianjin Case Study
Advanced Corporate
Case 2 – Tianjin Plastics
Executive Summary
Although business risk is low due to contractual obligations, and so is financing risk (despite high
debt levels), Tianjin Plastics project carries material currency risk, both for its cash flows as well as
dollar–profitability of Maple, the main sponsor. However, this should not turn the project
unprofitable. Broadly defined political/country risk must be considered and accepted by Maple, if
project is to happen. Hedge possibilities for those two risk categories are limited. We recommend
going on with the investment – NPV for Maple is around $ 12 Mio assuming constant RMB/USD
rate, and remains positive under all plausible FX scenarios. On the basis of profitability ... Show
Dollar–debt gets more costly, as Rmb weakens.
2186305707390Conversely, Rmb financing could virtually insulate project cash flows (in Rmb
terms) from FX exposure – Rmb debt obligations are not subject to FX–induced volatility. This
reduces the volatility of overall project cash flows, and decreases financing risk. It is easily to be
seen in Chart 2 – slope of the curve for dollar–financing is higher than for Rmb financing, reflecting
its greater sensitivity to currency risk.
23355302980055Chart2: NPVs as a function of annual Renminbi depreciation rate.
00Chart2: NPVs as a function of annual Renminbi depreciation rate.
In terms of profitability however, it is important to notice that the absolute interest expenses are
higher for Rmb financing, as long as the annual Rmb depreciation rate remains below approx. 4%.
Hence, the NPV for the project is generally lower. For high Rmb depreciation rates, FX effect on
dollar–denominated debt obligations becomes huge, and the opposite holds (notice respective curves
cross in Chart 2). Most of all however, dollar–collateral places great financial burden on Maple, as $
101.5 Mio should be arranged and serviced by the company itself. 4% interest on this deposit and
the possibility to draw funds as the loan amortizes do not outweigh the cost of borrowing this
amount in U.S. dollar market. As a result, the NPV becomes negative for any

Individual Course Paper
Individual Course Paper – China
China had a GDP per capita level similar to Zambia, less than half of the Asian average and was
lower than two–thirds of the African average at the outset of the reforms in 1978 (Eckart, 2016).
China was poor. Since then, China has grown exponentially experiencing nearly 10% GDP grown
per year until 2014 raising GDP from 155 current US Dollars in 1978 to 7,590 US Dollars in 2014
(Eckart, 2016). China, who accounts for 18% of the world's population, was able to lift 800 million
people out of poverty and growth in the middle class. This document will examine China's financial
and currency markets.
China's Financial and Currency Markets While China's leaders strive to create a communist
economic system, it ... Show more content on Helpwriting.net ...
However, China economy is beginning to slow down reaching a CDP growth of only 6.7%. The
strong declines in manufacturing and construction output have been key drivers of China's growth
are now instrumental in the decline. These declines are impacting heavy industries, like steel cement
and coal all of which are state–owned enterprises are clustered and of strategic importance t the
central government (Eckart, 2016).
Currency & Exchange Rate. The Chine Yuan Renminbi is the currency of China and the currency
code for China is CNY (Xe.com, 2017). The Chinese currency went through a few iterations. In
1914, starting with the Silver Dollar was established as China's official currency of the Republic of
China with copper, fen, and nickel coins added in 1930's (Xe.com, 2017). In 1935, the Silver Dollar
was replaced Fabi which was replaced by the Gold Yuan and in 1948 the Yuan Renminbi was
introduced as a way to stabilize the Communist areas held by mainland China.
In 1978, when China's economy opened the Yuan Renminbi was only used domestically and
exchange certificates were used by foreigners which resulted in a powerful black market (Xe.com,
2017). Although the Chinese government pegged Chinese Yuan Renminbi at 8.3 to the US Dollar, a
flexible mechanism of exchange rates was phased in and reduced it to 8.1 in 2005 (Xe.com, 2017).
Today, the US Dollar (one) equates to 6.89006

Pros And Cons: Legislation
Ryan Wilding ECON 4423 Policy Brief Professor McNown Pros and Cons: Legislation to Impose
Sanctions on China for Currency Manipulation The renminbi currency has experienced a fixed
exchange rate. The renminbi is seen as undervalued because the value of its currency has been
scrutinized to be artificially low, which gives Chinese companies an unfair advantage over floating
exchange rate countries such as the US. China has purchased more than $2.2 trillion in foreign
exchange reserves in order to maintain an undervalued currency (Scott 2010). China buying US
reserves increases the demand for dollars and increases the value of the dollar. Primarily, this makes
Chinese goods cheaper in the US and US goods more expensive in China. Keeping a weak currency
helps China to boost international exports because other countries purchase China's goods at a
relatively lower price. This helps to maintain growth in China's economy and provide more
manufacturing jobs, a staple to their economy. ... Show more content on Helpwriting.net ...
This causes US exports to become less competitive and Chinese imports more attractive, ultimately
increasing foreign demand. The US should feel threatened by a potential loss of domestic demand
causing a loss in available jobs in the US (Pettinger 2011). US consumers are able to purchase
Chinese goods at a lower price at the expense of a decreased demand for US goods, leading to a less
robust export economy in the US. The US should propose legislation to impose sanctions to limit
the risk the US faces concerning weak growth, larger trade deficits, and increased unemployment.
On the other hand, the US should halt the threat to propose legislation for fear of decreased buying
power of Chinese goods. In favor of the sanction, the US's current focus in on jobs rather than
buying power providing a greater economic benefit to the US by threatening

A Note On Chinas Fixed Exchange Rate
The topic of Chinas fixed exchange rate has remained as one of the fiercest subject in global
macroeconomics for an extensive period of time. A fixed exchange rate or pegged exchange rate is
where a currency value is fixed against the value of another currency, in the example of China, the
Yuan or Renminbi it is currently pegged to the US dollar, it has been fixed to the US since 1994
however within the past decade it has been allowed to appreciate a little at a time. But in times of
economical difficulties such as 2008 'China halted the Yuan's appreciation as worldwide demand for
Chinese products slumped due to the global financial crisis' (Picardo, 2009), this shows the given
Chinas recent economic difficulties government may keep the ... Show more content on
Helpwriting.net ...
China is able to persuade foreign manufacturing to their coasts as the cost is so low. For example, as
the dollar is stronger than the Yuan this would means that a T–shirt can cost a company five times
more to produce and manufacture in the US as compared to China. This has led international
companies to seek the cheap labour costs moving their manufacturing process to China, well known
brands such as: Harley Davison. Apple, Ikea and The Body Shop all own or have contract factories
within China. These huge global companies were obviously provoked to move manufacturing to
China because of the the low costs, therefore more profit for them, this was all caused by China
having in place the fixed exchange rate. Consequently, it would seem that having the fixed exchange
rate massively benefitted China.
Throughout the past decade, China has become a 'Manufacturing Powerhouse' (Eloot, 2013), low
salaries plus a strong supply base, makes an equation for ideal platform for exports, which china
defiantly benefited from. In 2011 China became the worlds largest producer of manufactured goods
and still remains to be, 'Factory Asia now makes almost half the world's goods' (The Economist,
2015). This has had a positive domino effect upon the wider economy in China, living standards
have doubled and the countries GDP per captia has doubled in the last 10 years 'an achievement that
took the UK 150 years to do' (Eloot, 2013) This

An Inverse Relationship Between Japanese Yen The Chinese...
Patterns In looking at the above figures 1 and 2, at a glance there seems to be an inverse relationship
between the Japanese Yen and the Chinese Yuan Renminbi (Yuan) with the exception of January
through April. However, in general as Japan's currency strengthens against the dollar, China's
currency weakens against the dollar. If the exchange rate ultimately reflects the amount of goods
and services one country can buy relative to another country; China's purchasing power is slowly
slipping away while Japan's is increasing at rates not seen in quite some time. While one might look
at the above charts and think that there is a direct correlation, the truth is much more complicated. In
theory it should be relatively simple to state a clear reasoning behind such patterns. As a global
economy it becomes much more difficult to look at two countries in relation to a third, and infer a
direct correlation. Either way, there is an interconnectedness and many are theorizing about the
causes; as well as attempting to look at patterns in relation to historical events in order to forecast
the future rates. Contributing Factors Even analysists with advance education and years of
experience did not foresee the above patterns, and additionally are rather confounded as to why the
rates are acting in such a manner. The Bank of Japan (BOJ) has taken steps to halt the appreciation
of the yen by decreasing interest rates (Hunter, 2016). While at the same time, many are accusing
China of

Essay on Controlability of the RMB
Controllability means that changes in the RMB exchange rate can be controlled through macro–
management. The reform should be propelled, but not be uncontrolled. Fluctuations in the financial
market and economy should be avoided. Gradualness means to push the reform step by step, taking
both present demand and long–term development into consideration.
All in all, China will continue to improve the formation mechanism of the RMB exchange rate, and
further complete an exchange rate system gearing to the market with more flexibility. But the reform
is broad and has far–reaching influences. A lot of preparation should be done, and favorable
conditions and environment are to be created so that all aspects can bear out the possible influences.
... Show more content on Helpwriting.net ...
Present Scenario
In 2013 Yuan appreciated by 2% as People's Bank of China allowed market forces to push the Yuan.
Exporters have been hit hard by this move who relied on weak currency to remain competitive in
international markets. But this controlled rise of the currency has still left countries sceptical that
China will not intervene in forex market. Chinas forex reserves have increased tenfold in the past
decade. Due to the resulting trade surplus central is forced to intervene to preven the Yuan from
appreciating.In the 3rd quarter of 2013 China's forex reserves have increased by more than $163
billion to a record 3.66 trillion US dollars.. Despite a 0.3% decline in exports in September agaisnt
an expected 6% rise , the increase in forex reserves is a clear evidence of market intervention by the
central bank. In March central bank deputy governer said that China will reduce its interventions
and will follow a more flexible currency policy. But an analysis of export data shows that central
bank intervened in the currency market to prevent fluctuation of the currency. Even though Yuan has
strengthened by 4–.4.3% over the past 2 years economic growth drivers have not shown any
significant change.
A big chunk China's forex reserves are tied up in low yielding US treasury bonds. This had made
chinesse investors nervous about the possibility of a US default. Although US securities form a large
part of China's forex reserves but this

How Theu.s Dollar Became The World's Most Dominant Reserve...
The objective of this paper is to give a clearer picture to how the U.S dollar became the world 's
most dominant reserve currency . Several countries use it as their official currency, and many others
use it as the de facto currency . Moreover, American dollar is the primary reserve currency, which is
used as the standard unit in international market for commodities such as gold and petroleum.
However, the dollar has been declining over the last three decades; in fact it has lost almost half its
value against other major currencies. The purpose of this research is to bring clarity for the
following questions: How, when and why the dollar became the world's reserve currency? Benefits
of having the largest world reserve currency? Comparing the dollar with the pound and the up and
rising Chinese Renminbi (RMB), and predictions for the future.
Keywords: Currency fluctuation; Reserve Currency; International Market; Global Reach
I. Introduction
We use the term "reserve currency" when we mean other countries ' use of dollars in international
trade. If Sweden, for example, buys goods from China, the goods can be paid with American dollars
instead of Swedish Krona. The methodological approach to address how, when and why the dollar
became the world's reserve currency will be supported by a historical and statistical analysis. With a
better understanding on how the U.S dollar become the most powerful currency we can advance to
understand the cost and benefits of it.

The Full Convertibility of Renminbi: Consequences and...
The Full convertibility of Renminbi: Consequences and Influences
Abstract This paper indicates the issue of full convertibility for the Chinese currency,
Renminbi(RMB), and its impact on the economy of China. It does not only point out the sequencing
of Renminbi's full convertibility, expounding the detailed concepts procedure of currency
convertibility (current account convertibility and capital/financial account convertibility and full
convertibility) but also focus on the necessity and challenges will bring to China based on this
subject. A review of historical process toward the full convertibility of Renminbi will be provided.
There are still various restrictions on capital account convertibility in China. It still takes some ...
To talk about one currency's convertibility often implies how open an economy is as the concept of
convertibility of one currency covers the unrestricted use of a country's currency for international
currencies allowing it to be exchanged for foreign currency to make a transaction.
1. Current account and convertibility
The current account is the sum of the balance of trade (exports minus imports of goods and
services), net factor income (such as interest and dividends) and net transfer payments (such as
foreign aid).
The definition of Current account convertibility based on the 8th item of IMF, Member States agree
that no exchange restrictions can be imposed to international payment and funds transfer;
discriminatory or multiple currency exchange rate measures are not allowed; It is all member states'
obligation to exchange other members' domestic currency.[2]
2. Capital account and convertibility
In Macroeconomics and international finance, the capital account (also known as financial account)
[3]reflects net change in national ownership of assets.
However, the term "capital account" is used with a narrower meaning by the IMF and affiliated
sources. The IMF splits what the rest of the world call the capital account into two top level
divisions: financial account and capital account.[4]
Given the complexity of capital account transactions, on capital account liberalization, the IMF 's
demands are much broader, there does not seem to be a definition

2. Should China Revalue the Yuan Against the Dollar? If...
Should China revalue the yuan against the dollar? If so, what impact may this have on (1) US
balance of payments, (2) Chinese balance of payments, (3) relative competitiveness of Mexico and
Thailand, (4) firms such as Wal–Mart, and (5) US and Chinese retail consumers?
China, the largest growing market in the world, currently has a policy regarding monetary regulation
that allows the Yuan to "float". This has seen the Yuan appreciate by approximately 24% over the
past few years. Today, the exchange rate between the Chinese Yuan and the American Dollar is
approximately 6.3 Yuan to 1 Dollar. Some argue that China should revalue the Yuan again the dollar,
establishing a more fixed exchange rate. Others believe that current should allow ... Show more
This would allow people in the United States to export the goods they produce more easily due to
them being relatively cheaper in comparison to their past price. Having exports increase, however,
would cause America's imports to decrease. This would make it harder on international firms that
have production occurring in China and other places around the world. A lot of Americans would
believe this to be a good thing, as it would reduce job migration overseas. On the other hand, I see
this as hurting the established American companies that rely on overseas production. If the United
States did not have much production occurring overseas, then a weaker dollar would increase
exports without as much of a detriment to the imports needed by corporations. With the increasing
international trading of firms, revaluing currency would cause them to have to reevaluate their
strategies and accommodate a more valuable Yuan. In the meantime, they would lose profits until
their new strategies could be implemented. Another argument against the Yuan being revalued that I
learned through the assignment reading was that a massive change in exchange rate policies could
cause "macroeconomic turbulence". This could have unexpected results of economic decline due to
the uncertainty the revaluation of the Yuan could have on the economy. While change itself is
neither good nor bad, change that produces uncertainties would have the negative

Why A Currency Board Is A Rule Based Monetary Institution

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