Impact of RMB's Exchange Rate on the Chinese Economy

Topics: International trade, United States dollar, Export Pages: 4 (1446 words) Published: October 30, 2013
China’s perspective
Chinese officials argue that their currency policy is not meant to favor exports over imports, but instead to foster economic stability through currency stability. The policy reflects the government goals of using exports as a way of providing jobs to Chinese workers and to attract Foreign Direct Investment (FDI) in order to gain access to technology and know-how. Yuan exchange rate regime could affect China’s economic growth also can through two aspects: the first is through the level changes, namely exchange rate appreciation and depreciation; the second is through the flexibility changes, namely the exchange rate fluctuation range expansion. Theoretically, the adjustment of Yuan exchange rate could impact China’s economy from various channels, and it could also be impacted by the growth rate vice versa. The change of exchange rate regime could impact trade and capital flow in the first step, and then the effects will transmit to industry structure, employment structure and price level, thus influence economic growth on the whole. China’s policy of intervening in currency markets to limit or halt the appreciation of its currency, the Yuan (RMB), against the U.S. dollar and other currencies has been an issue of concern for many in Congress over the past decade who view it as one of several distortive economic and trade policies that are used to convey an unfair competitive advantage to Chinese producers and exporters. They charge that China’s currency policy is intended to make its exports significantly less expensive, and its imports more expensive, than would occur if the Yuan were freely-trade currency. Yuan Appreciation Impact on China’s economy

The Yuan appreciation has two aspects of the effects on China’s economic stability and development. Yuan appreciation will benefit China’s economy, be conducive to cheaper imports, enhance the Chinese people’s purchasing power, and be favorable for China’s industrial structure optimization....
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