Yuan - the same amount of their own currency. The demand of...

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Name: Bao Dang ID: 16-867-4989 China allows more options in the Yuan The growth of the economy of China makes its currency value, the Yuan, rise up quickly. On February 17, 2011, Wall Street Journal reports that China allows more options for Yuan for trading. The recent changes allow faster appreciation of the Yuan, which is a sensitive political decision made at the highest level in China. As many more countries want to trade with China, they increase the demand of the Yuan. In the foreign exchange market of the Yuan with other currency, the Yuan appreciates. If companies in China want to import goods, the appreciation of the Yuan means that with the same amount of the Yuan, they can buy more good. Therefore, appreciation of the Yuan would be in favor for them. However, many China’s companies produce goods and export them to other countries. Appreciation of the Yuan means that other countries just can buy fewer products from China with
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Unformatted text preview: the same amount of their own currency. The demand of Chinas products will decrease. Therefore, the rise of the Yuan could hurt many businesses that exports products in China. Allowing appreciation of the Yuan is a sensitive political decision. Chinese authorities give businesses more tools to guard against a possible rise in the value. China expands the use of the Yuan outside China for both trade and investment. Therefore, the supply of the Yuan in the international market increases, so the rise in value of the Yuan will slow down. However, when China allows more options for Yuan to be traded, foreign exchange trader can trade more with Yuan, and increase demand for the Yuan. Therefore, ultimately, these changes could make it easier for the government to allow Yuan to rise faster. China will issue its currency slowly so the supply will not increase dramatically to help the Yuan become more internationalized, but not depreciate....
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This note was uploaded on 10/16/2011 for the course ECON 110 taught by Professor Vernon during the Fall '07 term at BYU.

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Yuan - the same amount of their own currency. The demand of...

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