HW week6 - 1 Global Finance Introduction Nowadays, China is...

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1 Global Finance Introduction Nowadays, China is one of the strongest countries in the world. Therefore, I focus on currency policy in China. China’s current monetary policy is pegged on the US dollar. China manipulates its currency to become undervalued. Because China wants to increase its exports, decrease its imports, and grow its economy, China prefers to have undervalued currency. However, some countries, including the United States, do not like China’s monetary policy, because it caused trade imbalance and deficit. The United States pushes China to appreciate its RMB. In October, 2010, China will appreciate its RMB much further. In the near future, China will appreciate its RMB to the fair exchange rate level against the US dollars. Why China makes its currency undervalued? A weaker exchange rate would make Chinese exports more competitive and increases the demand. And Chinese economic growth depends on exports. Therefore, China cannot appreciate RMB. Especially, China is the world factory in recent years. Because of a problem of unemployment, growth in exporting manufacturing industries can create more jobs. Moreover, China has channeled Chinese saving into
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HW week6 - 1 Global Finance Introduction Nowadays, China is...

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