EssayClub.com - Free College Essays and Term Papers

Devaluation Of Chinese Curency

TABLE OF CONTENTS

ABSTRACT - 2 -
INTRODUCTION - 3 -
THE NEED FOR REVALUATION - 5 -
The US point of view - 5 -
The Chinese point of view - 7 -
Arguments and counter-arguments against the revaluation of the Chinese Currency - 9 -
IMPACT ON THE US ECONOMY - 10 -
Impact on trade deficit - 10 -
Impact on interest rates - 10 -
Inflationary pressure - 10 -
IMPACT ON THE CHINESE ECONOMY - 11 -
Impact on foreign exchange reserves - 11 -
Impact on Chinese banking sector - 11 -
Impact on Chinese businesses - 11 -
Impact on capital inflows - 12 -
Political impact - 12 -
Cooling of the economy - 12 -
IMPACT ON THE REST OF THE WORLD - 13 -
Inflation - 13 -
Emergence of new low-cost production centers - 13 -
WAYS OF APPROACHING THE REVALUATION - 13 -
Coordinated action by East Asian countries: - 13 -
Gradual revaluation - 13 -
CALCULATION OF THE UNDERVALUATION – The Export-Import Elasticity method - 14 -
Assumptions - 14 -
Procedure - 14 -
CONCLUSION - 15 -
Appendix I: Trade deficits of the US with some of its trading partners in the year 2004-2005 - 16 -
Appendix II: U.S. Import/Export ratios - 16 -
Appendix III: China’s monthly import-export data - 17 -
Appendix IV: Estimation of undervaluation of the yuan - 20 -
BIBLIOGRAPHY - 21 -

ABSTRACT

In the project we have firstly explained the basics of Foreign Exchange as to what it is, how is it determined, what are the different types.

Then our focus is on revaluation of Chinese economy as what is the need for revaluation, all the integrities are dealt with from Chinese point of view and also from US point of view. Now the question is why from US point of view as US is the biggest trader for China both in case of Imports and Exports so it is imperative to also take US into consideration.

Then we have studied the Impact on Chinese Economy, US Economy and World as a whole on the basic macroeconomic parameters like Interest Rate Structure, Balance of Payment, and Impact on various...