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Current and potential power of the Chinese currency in a global financial economy - Essay Example
Author : bernard20
Finance & Accounting
Pages 7 (1757 words)
China’s economy is strongly reliant on investments flows and international trade. In 2007, China overtaked the United States to emerge the globe’s biggest products exporter after the EU. The net exports for China contributed to 1/3 of the GDP development in 2007. …
The present international economic hold back is having substantial unconstructive effects on China’s export industries, and sectors that rely on international direct investment flows. The degree of China’s contact with the ongoing international financial crisis especially from the struggle of the American sub-prime mortgage issue is not clear. However, china places various limitations on capital flows especially outflows, in part in order, to uphold its administered float monetary policy. These limitations restrict the capacity of Chinese residents and many companies to invest outside the country, forcing them to invest locally even though, some Chinese try to move funds outside the country illegitimately. Therefore, the disclosure of Chinese private sector companies and private investors to sub-prime American mortgages is expected to be small. For 25 years, globalization formed unprecedented degrees of both economic risk and economic growth. Monetary markets became free, which allowed governments and firms to invest more openly. Even so, as international trade grew larger, it also grew more complicated. Speedier-flowing capital became more unstable and economic danger became more difficult to track. Local regulators struggled to survive with changing financial practices, most of which they did not entirely understand. ...