Is Chinese Currency Bill Desirable for U.S. Economy?
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- Date Submitted: 11/26/2013 02:09 AM
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Is Chinese Currency Bill desirable for U.S. economy?
In the beginning of October, a bill designed to punish China for undervaluing its currency put Chinese currency exchange rate back under the U.S political and economic spotlight. This bill is called Chinese currency bill, its intent is to urge the Chinese government to appreciate its currency. Chinese currency, known widely as the yuan, was once pegged to the US-dollars at the rate 8.28 for seven years; as Ahlstrom and Bruton demonstrated in their book International Management: Strategy and Culture in the Emerging World, the yuan was allowed to float in a narrow margin determined based on the world currencies market and under the supervision of the People’s Bank of China. (Ahlstrom and Bruton) Though China has gradually increase the flexibility of its currency exchange rate, according to Washingtonpost, the yuan is estimated to be undervalued by between 15 and 38.5 percent and has cost the United Sates more than 1.6 million jobs.(Somnez)
Just for clarification, when we say a currency is weak, it usually means a currency which has depreciated or less desirable comparing to another currency.(Mankiw) But in this case, Chinese yuan does not have a floating exchange rate toward U.S. dollar that allowed its value to fluctuate solely according to the foreign exchange rate, that’s why many reports called yuan to be artificially weak, since they believe the yuan is undervalued because of China’s foreign exchange policy. According to many Senate members, the artificially weak yuan, comparing to the strong U.S. dollars , is what triggered the 2011 Chinese currency bill. (Mufson)
On October 6th, the Chinese currency bill has, what Washingtonpost addressed it as “cleared a key procedural hurdle” in the Senate, by getting 50 out of 62 senators stood on its side.(Helderman) This vote led Senate be able to pass the bill and drew an end of debates on the proposal.
Even though the bill had already passed Senate, according...
In the beginning of October, a bill designed to punish China for undervaluing its currency put Chinese currency exchange rate back under the U.S political and economic spotlight. This bill is called Chinese currency bill, its intent is to urge the Chinese government to appreciate its currency. Chinese currency, known widely as the yuan, was once pegged to the US-dollars at the rate 8.28 for seven years; as Ahlstrom and Bruton demonstrated in their book International Management: Strategy and Culture in the Emerging World, the yuan was allowed to float in a narrow margin determined based on the world currencies market and under the supervision of the People’s Bank of China. (Ahlstrom and Bruton) Though China has gradually increase the flexibility of its currency exchange rate, according to Washingtonpost, the yuan is estimated to be undervalued by between 15 and 38.5 percent and has cost the United Sates more than 1.6 million jobs.(Somnez)
Just for clarification, when we say a currency is weak, it usually means a currency which has depreciated or less desirable comparing to another currency.(Mankiw) But in this case, Chinese yuan does not have a floating exchange rate toward U.S. dollar that allowed its value to fluctuate solely according to the foreign exchange rate, that’s why many reports called yuan to be artificially weak, since they believe the yuan is undervalued because of China’s foreign exchange policy. According to many Senate members, the artificially weak yuan, comparing to the strong U.S. dollars , is what triggered the 2011 Chinese currency bill. (Mufson)
On October 6th, the Chinese currency bill has, what Washingtonpost addressed it as “cleared a key procedural hurdle” in the Senate, by getting 50 out of 62 senators stood on its side.(Helderman) This vote led Senate be able to pass the bill and drew an end of debates on the proposal.
Even though the bill had already passed Senate, according...