Details about the changes in the currency policy

1
Introduction??

• Details about the changes in the currency policy
• ?????????
• Japans example
• ?????
• The views of Chinese Economists
• ?????????
• Will it continue to appreciate???????????
• Views of U.S. economists
• ?????????
• The Market Economy Status
• ??????
• U.S. Consumption habits
• ???????
• Impact of revaluation on China ???????????
• The Effects of the revaluation on the U.S.
• ???????????

2
The US-China Dispute about the 'Undervalued
Yuan'

• By
• Darvesh Daswani
• and
• Kwok Pui Sum, Stanley

3
Details about the changes in the currency
policy?????????

• From 1USD against 8.28RMB to 1USD against
  8.11RMB
• ??????????????????????????

4
Details about the changes in the currency
policy?????????

• Managed float, reset the value of the yuan at
  the end of each trading day according to the
  value of a group -- or basket -- of other
  currencies. Fluctuate in a tight 0.3 daily band
• ??????,??????????????????????????,?????????0.3
  ?
• The basket of currency includes US dollar, euro,
  Japanese Yen and the won of the Republic of Korea
• ???????????,??,?????

5
Japans example?????

• In the 1950s to 1960s, the economy of Japan is
  increasing rapidly.
• ???????,??????
• Export to the US from Japan increase dramatically
• ??????????????
• Yet, Japan still succeeds in making the trade
  balance with other countries.
• ??????????????
• Thats why the Americans still could withstand
  the progressively increase in the Japans inputs.
  
• ????????????????

6
Japans example?????

• In the middle of 1970s, the bilateral trade
  surplus gained by Japan (mainly in manufacturing
  sector) has progressively increased.
• ??????,????????????(??????????)
• It met a peak in 1986 which is equal to 1.4 of
  the US GDP. After that, Japan continuously keeps
  a huge surplus in the trading between the two
  countries.
• ???1986 ????,???????????? 1.4,????????????

7
Japans example(?????)

• Absolute contraction in the USs manufacturing
  industry was resulted. Then, the US used sanction
  as a threat to seek immediate actions from
  Japanese government to deal with the trade
  imbalance.
• ????????,????????????????????????,????????????????
  )
• The Japanese government finally agreed to
  appreciate yen
• ???????????
• Since 1995, Japan has been in economic recession
• ??1995,????????

8
The views of Chinese Economists?????????

• Zhou Xiaochuan, the governor of the People's Bank
  of China
• ???????????
• Wu Xiaoling, the vice chairman of the Peoples
  Bank of China
• ????????????
• Yu Yongding, one of the committee members of the
  currency policy committee of the Peoples Bank of
  China
• ??????????????????

9
Will it continue to appreciate???????????

• According to Chinese financial analysts
• ?????????
• Yuan will appreciate in the future
• ????????
• Rate of increase will be monitored by the central
  government in a step by step way.
• ???????????????
• Not because of foreign pressure but because it
  would promote China's long-term growth and
  stability
• ?????????????????????,?????????
• Slow down the growth of production in
  export-oriented industrial branches and cut the
  speed of the economic development in general
• ??,??????????,??????????????

10
Views of The U.S. Economists?????????

• Some are in favor of the revaluation
• ?????????
• Some governing bodies such as the IMF have sided
  the U.S. in the debate
• ???????IMF????????????
• Allies such as EU and Japan came to the aid of
  U.S.
• ???????????????

11
Views of The U.S. Economists?????????

• Other economists believe that it is just a cover
  up from the real problems of the U.S.
• ????????????????????
• Chinese imports have been growing faster than
  exports, so U.S. has no justification
• ????????????????,??????????????

12
Market Economy Status??????

• MES means that products sold to other countries
  will be calculated in Yuan rather than in other
  currencies of third world countries
• MES????????????????????,??????????????
• China has not met the criteria of the 1930 tariff
  act
• ??????1930 tariff act??????
• China has MES from 43 countries, however, none of
  them include EU or U.S.
• ???43????MES??,???????????????

13
Market Economy Status??????

• Argument that China will do to U.S. and EU what
  it did to South American countries
• ????????????????MES,???????????????????????????
• U.S. and EU have decided to hold back MES until
  they get something in return
• ???????????MES??????????

14
Market Economy Status??????

• U.S. want China to fulfill the requirements of
  labor reforms and currency rates
• ??????????????????
• China agreed to 15 years without being an MES
  upon joining the WTO
• ???????????????,???MES??

15
U.S. Consumption habits???????

• U.S. largest consuming nation in the world
• ?????????????
• Trade deficit with China was USD 162 billion in
  2004
• ????????????162 billion
• China is the 5th largest exporter to U.S.
• ????????????

16
U.S. Consumption habits???????

• Many economists relate the trade deficit to low
  Yuan plus lower cost of labor
• ?????????????????????????????????
• U.S. firms starting to shift across to China for
  production
• ???????????????
• U.S. has threatened to put 27.5 tariff on China
  if it doesnt revalue the Yuan
• ???????????,??????27.5 ???????????

17
U.S. Consumption habits???????

• China reduced tariff rates, decreased amount of
  quotas, and improved trading rights during 1999
• ?1999,?????????,???????
• China has been forced to use just 4 years to
  lower tariffs
• ???????????????

18
Impact of revaluation on China ???????????

• Domestic banks and firms must become more
  flexible
• ????????????
• Enhance risk awareness and to adapt to the
  currency change as quickly as possible
• ???????????????
• Surge in hot money flows into China(Short term)
• ????(??)
• Stimulate domestic demand
• ????

19
Impact of revaluation on China ???????????

• Dampening effect on foreign investment
• ??????
• Companies that are already operating on
  razor-thin margins, will be kicked out of the
  market due to decrease in export
• ??????,????????????????
• Affect Chinas Western development project
• ???????????

20
The Effects of the revaluation on the
U.S.???????????

• Domestic China could buy less government bonds
  and this could lead to the U.S. having financial
  problems
• ???????????????,?????????
• There could be an increase in the jobs provided
  in the U.S.
• ??????????

21
The Effects of the revaluation on the
U.S.???????????

• Export Better trade status with China
• ????????????
• Appreciation percentage more a symbolic than
  economic gain
• ??????,???????????