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Chinese Yuan vs. US Dollar - Essay Example
Author : wilmer95
Finance & Accounting
Pages 8 (2008 words)
Chinese Yuan vs. US Dollar Name Institution Date Introduction Deng Xiaoping was a China’s reformist who initiated the country’s economic rice to the modern world of trade in 1980s. He led to the introduction of policies that resulted to opening up China economic relations at a global scale…
The use of the two currencies in trade began in 1985 on a bilateral arrangement between the two countries. In 2008, the volume of imports from China hit the $337.8 billion mark. The China government has increased the use of the Yuan in foreign trade over the years leading dynamism in its exchange rates with other world currencies. According to economists, the China government is suspected to devalue the currency in order to increase the competitiveness of their local industries. In addition, the Chinese Yuan is less flexible with respect to the exchange rate against the US dollar and other world currencies. An effort to increase the flexibility of the Chinese Yuan by the government has resulted to the use of the currency internationally. The objective is increasing the use of the currency and achieving its use as a reserve currency in the long term (Derosa 2011). The last five financial years indicate a relatively stable exchange rate between the Chinese Yuan (CNY) and the US dollar (USD). The table below indicates the official exchange rates posted in the two countries’ markets. The record shows how much one US dollar is equivalent to the Chinese Yuan Year USD Chinese Yuan 2009 1 6.8314 2010 1 6.7703 2011 1 6.4615 2012 1 6.3123 2013 1 6.1910 Since 2009 to date, the value of the Chinese Yuan has been increasing. ...