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Discuss the issues involved with pegging or floating the Yuan to the US dollar.

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  • Post Date 2018-11-06T12:04:33+00:00
  • Post Category Essays

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Discuss the issues involved with pegging or floating the Yuan to the US dollar.

Stocks and Bonds

INSTRUCTIONS:

Please write one page.

Please Write on a graduate level and give reasoning

Please use APA style.

Please use two references both can chosen from the reference on the background page that I will attach. References must have website URLs so they can be verified easily. 

Please discuss the following:



Stocks and Bonds



Prior to the financial crisis in 2007/2008, the U.S. Treasury Department as well as Congress had been asking China to revalue upwards the value of their Renminbi or Yuan. China responded to these repeated requests by allowing the Yuan to trade within a narrow band. The band itself was then shifted upwards or downwards by small increments from time to time. Still, the U.S. claimed that China had not done enough and should raise the value of the Yuan by at least a further 20%. The reasons given to justify this requested increase were as follows:

The artificially low value of the Yuan makes U.S. manufactured exports unattractively priced in China.

The undervalued Yuan leads to excessive U.S. imports of Chinese-made goods, which in turn, leads to an unwelcome trade balance in China`s favor. For example, the trade deficit with China was roughly -$258,506.0 million in year 2007. These numbers shrunk further during 2009 as recession hit the global economy. In year 2011, the trade deficit with China was roughly -295,456.5 million (http://www.census.gov/foreign-trade/balance/c5700.html).







China chose to change their `floating` arrangement and pegged the Yuan to the USD at a rate they selected. China holds such a large investment in U.S. Treasuries as a result of the continuing U.S. trade surpluses that the U.S. does not have a great deal of leverage. If China sold those Treasuries the U.S. dollar would fall significantly in value.



Discuss the issues involved with pegging or floating the Yuan to the US dollar.

Please give reasoning.

CONTENT:

Stocks and Bonds Name: Subject: Date of Submission: Stocks and Bonds Since 1994, China has pegged its Yuan currency to the US dollar. The peg was removed in 2005, which allowed a revaluation. Nonetheless, the Yuan has had its influence on global export’s exchange rates (Frankel, 2005). This is the reason why China possess a huge surplus in trading and

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