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Chinese Yuan

In: Business and Management

Submitted By ivycsh
Words 1558
Pages 7
The Yuan:
The Future Value of RMB
Under the Economy of the World
Shanghua Chi

From whatever point of view, economic growth is always the most crucial factor in deciding the value of currency for a country. In China, one of the biggest developing countries, the appreciation of the RMB has risen by 28% since 2005, and it has been close to 4.5% growth per year. (Chinese Yuan, 2011) The question is what is the future of RMB? Will it continue in a rising trend? What things can be affected by the change of currency value?
In general, the currency value will change when the relation between supply and demand is becoming different. “A currency will tend to become more valuable whenever demand for it is greater than the available supply. It will become less valuable whenever demand is less than available supply.”(Exchange rate, 2011) However, answering to these questions involves more complicated aspects: world trading situation, inflation level, and unemployment rate. There is an interactive relationship, which exists between these aspects and the exchange rate. Therefore, to predict the target value of RMB is extremely important for running China. Combined with current reports and researches, I came to a conclusion that the predicted value of RMB should not rise dramatically, and is better to keep the present value.
Opposing position
The opposing point is that the value of Yuan should rise up. There are broad concerns among economists on a global scale that RMB is undervalued. According to a report from The International Monetary Fund (IMF) advocated in 2010 that China's currency remains undervalued. (International Monetary, 2010) Many notable economists, such as World Trade Organization Director-General Pascal Lamy, U.S. Federal Reserve Chairman Ben Bernanke,( White, G., 2010 ) and Nobel Laureate Paul Krugman,( Krugman, P. , 2010) have…...

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