China Exchange Rate

Running Head : CHINA EXCHANGE RATE

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In the world there are a number of countries that conduct business amongst themselves so as to obtain the goods and services that they do not have . In for the countries to do to business together they should a currency that is convertible to other countries currencies that they would like to do business with . Currency exchange rate refers to the rate that is used to convert one country currency to another .There are times when the exchange

rate fluctuates this is due to economic factors such as : inflation , industrial production and the geopolitical events

The amount of currency that one gets from the United States dollar in China

United States dollar is considered to be the standard unit of currency of all the commodities that are sold and bought in the global market . It has been noted that even though the dollar is a standard currency it faces persistent trade deficit that leads to its depreciation and hinders the free flow of trade within and without the country . The Chinese governments ' currency is known as Chinas Yuan or renmimbi .China has been having its exchange rate pegged to the dollar as from 1994 to July 2005 at 8 .28 Yuan .The amount of currency that one gets from United States from China is 1 United States dollar would amount to 6 .84510 Chinas Yuan Renmimbi (Linsun , C . 2003

The kind of exchange rate that china has

The government of China stated that it would use the more flexible or floating exchange rate that would tie the Yuan currency to market basket of currencies that would use a fixed rate like the United States dollar It previously used to have its currency pegged to the United States currency for a decade , but as from June 23 2005 the government of China stated that it would raise the value of the Yuan against the dollar by 2 and later on they would float it in the market using a basket of foreign currencies . The reasons why the changes were made were that there were complaints from the United States secretary John Snow and other trading partners that the Chinese currency policy gave some of the businesses the opportunity to sell goods and services at lower prices than those of its competitors as this would affect the economy significantly . It was noted that the Chinas Yuan renmimbi currency would appreciate in the future against the dollar in the future . The re-evaluation of the Yuan Chinese currency would lead to its reduced competitiveness of its exports and lead to the competiveness of the United States exports .The repercussions of having the Chinese currency appreciating are : the investors would find it difficult to invest in that country since the value of the exports would decline while the outputs from various industries would also decline thus leading to reduced national income for that country . Chinese government later on stated that it would slightly revalue...