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Should the Chinese be allowed to continue to fix the Yuan - Essay Example

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With the growing capacity to compete with International standards, China is emerging as one of the biggest competitors in the world. It is in the league of beating any country in the world in the quality of products and exports. China is throwing big challenges to all the super powers for the last couple of years…
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Should the Chinese be allowed to continue to fix the Yuan
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Download file to see previous pages The exhibitions held at Guangzhou, Beijing every now and then, attract a lot of participants from the world to buy and sell their products. This has become a platform for Industries to show-case their products. This has taken away the hosting rights from Germany and France, where Industrial Expo used to be held in the past. (ChinaDaily 2009)
According to the leading businessmen in China, it is reported that the appreciation of their currency has surpassed the growth of their business beyond their dreams. Due to the higher valuation of Yuan, the exporters who have been making money on Dollar denomination found to be declining in their profits. At the same time the exhibitors are afraid that the process may slow down their export due to the valuation. However the associations and the chamber of commerce in China say that this is only a passing phase and in due course of time it will become normal, as the economy worldwide is improving. (ChinaDaily 2009)
The Chinese government, in order to reduce the gap with the major buyer like United States of America, revalued its currency against U.S dollar, to avoid the fixation of the rate of Yuan against U.S dollar. The stronger Yuan will result in the Chinese products being priced higher. By that the sales in US will increase sales in the market and thus bring in a greater amount of dollars. There is a fear in the US market that the Chinese products will cost more due to the fixed rate of Yuan. (Isidore, 2005)
The US Senators rather welcome the change of Chinese financial decision though it is not appreciated by the congress. The financial analysts say that the change though small in stature, it is very significant since they have revalued the currency that will pave way for further future valuations. The Global Economists feel that it may not cause an immediate impact on the economics of the trade but will open the doors to strengthen the Chinese currency. But, the incident resulted in the US stocks soaring immediately, only to become normal after some time. (Isidore, 2005)
It has been established that the fixed rate of the currency with US $ has widened the trade gap between the two and kept the Chinese made goods cheap buy at US. The Central Bank of China assured that the exchange rate band would be adjusted when necessary according to market development as well as economic and financial situations. In a survey conducted in US it is reported that there will not be much impact on the trade due to the revaluation of the Chinese currency but, there could be market stabilization favoring China in the long run. The US is trying to impose trade sanctions on Chinese imports if market based valuation of Yuan is not allowed. (Isidore, 2005)
The major move by the Chinese Government in the currency conversion is backed by the exporters, manufacturers and the suppliers and also the trade bodies /associations in the country. This is a great step forward by them to strengthen the financial and economic stability of the country. The President of China Hu Jintao told US President at a meeting, that in the scene of outbreak of International financial crisis, China has maintained stable Yuan exchange rate despite the difficult economic conditions. When there were Asian financial crisis during 1990's, China earned plaudits for ...Download file to see next pagesRead More
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