Exchange Rate Manipulation
China’s stock market crashed on July 9th, 2015 within just a matter of minutes, now that it is nearly three months later, how is their attempts at recovery going to affect the rest of the world? As China’s economy declines, their attempts to stop their own economic bleeding is only putting a stop to the United States economic recovery through exchange rates. Current exchange rates are will hurt the U.S. economy due to China’s devalued currency against the U.S. dollar.
China’s devalue in their currency and has now has their banks allowing is to set exchange rates in line with free market practices making them more market-oriented in terms of exchange rate which is something American officials want. In April, right before the crash of China’s stock market, the U.S. Treasury Department was praising China for their recent efforts in raising their value of their currency since it was undervalued (Swanson, 2015). However, this was short-lived since just after, China’s economy fell and they devalued their already low currency even lower. For many years U.S. Congress and American businesses have said China’s currency was far too weak and China’s set rates allowed their exporters to sell off their good at artificially low prices in the world market. Due to this market force, this allows the currency to depreciate instead of appreciating, allowing Chinese products cheaper compared to American products (Wei, 2015).
The Chinese central bank devalued their currency in an attempt focus on exports to boost their economy. Doing so has yet to prove effective in benefiting their economy but their changes are not only an attempt to change their economy, it is changing the U.S. economy due to the low currency they have set against the American dollar. This process is called currency manipulation in which countries sell their own currencies in the