Yuan Projection, Currency Report
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- Date Submitted: 04/10/2011 02:29 PM
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Background and Major Movements
The RMB is the official currency of the china (PRC) and Yuan is principal of RMB .Throughout its history Yuan currency has gone through five distinguishable phases:
The first phase, during the era before 1970, the Yuan was pegged to the U.S. dollar at 2.46 Yuan per. During the time between 1970s and 1980, it was appreciated until it reached 1.50 Yuan per USD in 1980. In the Second phase, starting from 1980, the currency is devalued substantially period in order to improve the competitiveness of Chinese exports. In this period, China was experiencing economic reform and desired a more competitive and productive economic environment. In order to stimulate the domestic economy by discouraging import and encouraging exports, the Chinese government intended to protect the exchange rate and manipulate the currency. Thus, the official USD/CNY exchange rate declined from 1.50 in 1980 to 8.62 by 1994(Areddy, 2005, p. A.2). Improving current account balance during the latter half of the 1990s enabled the Chinese government to maintain a peg of 8.27 Yuan per USD from 1997 to 2005. In 2001, China became a member of the World Trade Organization (WTO) and agreed to make an adjustment to its current Yuan/USD rate. Under pressure from the U.S. government, China was urged to take action to revalue the Yuan immediately.
In Third phase, starting on July 21, 2005, as a result several years US government pressure, China lifted the peg policy. People’s Bank of China announced that the Chinese currency was immediately revalued by 2.1% and allowed to move in a way that would reflect the dictates of supply and demand. This was a significant move on China’s part because the Yuan had been fixed at 8.3 to the US dollar for over a decade. The currency started to strengthen since then to hit the lowest level of 6.82 on 2008.
Forth phase starts when 2008 financial crisis led the Chinese official be more cautious on their domestic economy and therefore,...
The RMB is the official currency of the china (PRC) and Yuan is principal of RMB .Throughout its history Yuan currency has gone through five distinguishable phases:
The first phase, during the era before 1970, the Yuan was pegged to the U.S. dollar at 2.46 Yuan per. During the time between 1970s and 1980, it was appreciated until it reached 1.50 Yuan per USD in 1980. In the Second phase, starting from 1980, the currency is devalued substantially period in order to improve the competitiveness of Chinese exports. In this period, China was experiencing economic reform and desired a more competitive and productive economic environment. In order to stimulate the domestic economy by discouraging import and encouraging exports, the Chinese government intended to protect the exchange rate and manipulate the currency. Thus, the official USD/CNY exchange rate declined from 1.50 in 1980 to 8.62 by 1994(Areddy, 2005, p. A.2). Improving current account balance during the latter half of the 1990s enabled the Chinese government to maintain a peg of 8.27 Yuan per USD from 1997 to 2005. In 2001, China became a member of the World Trade Organization (WTO) and agreed to make an adjustment to its current Yuan/USD rate. Under pressure from the U.S. government, China was urged to take action to revalue the Yuan immediately.
In Third phase, starting on July 21, 2005, as a result several years US government pressure, China lifted the peg policy. People’s Bank of China announced that the Chinese currency was immediately revalued by 2.1% and allowed to move in a way that would reflect the dictates of supply and demand. This was a significant move on China’s part because the Yuan had been fixed at 8.3 to the US dollar for over a decade. The currency started to strengthen since then to hit the lowest level of 6.82 on 2008.
Forth phase starts when 2008 financial crisis led the Chinese official be more cautious on their domestic economy and therefore,...