...China and the Yuan-Dollar Exchange Rate Q1) How credible was China’s announcement to let the yuan float? Chinese Yuan/US Dollar Exchange Rate Index, July 2005-Nov 2011 Chinese government has declared its intention to let the yuan float on 19th June of 2010, and this will most likely result in the Yuan to appreciate as the Yuan is under-valued. This reform was of the Renminbi (RMB) exchange rate regime was to enhance its exchange rate flexibility. This announcement may seems dubious because China has long adopted a fixed exchange rate regime since 1994 in which the Chinese government has maintained a policy of intervening in currency markets to limit or halt the appreciation of its currency, the RMB, against the U.S. dollar and other currencies. Known as the world’s manufacturing factory, keeping such a policy will definitely make its exports relatively and comparably cheaper to other countries, especially United States. Similarly, this will also make U.S. exports to China much more expensive, than would occur under free market conditions. As such, if China allows its yuan to float and appreciate, it may lose its competitive position as it may suffer a loss in sales of its exports due to its goods being relatively more expensive to foreign buyers. China’s announcement to let its yuan appreciate was credible because earlier on, the yuan actually appreciated 17.5 percent the U.S. dollar between July 21 2005 to July 21, 2008. In July 21, 2008 China has stopped its Yuan appreciation...
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...The Yuan: The Future Value of RMB Under the Economy of the World Shanghua Chi AWB Introduction 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...
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...Financial Markets & Institutions Group Assignment Yuan Devaluation Group 2 Group Members Kouadio Dieudonne XPGDM-18 Rohit Khandelwal XPGDM-28 Shruti Tibrewal XPGDM-32 COUNTRY AT A GLANCE Population | 1.364 billion | 2014 | GDP | $10.35 trillion | 2014 | GDP growth | 7.3% | 2014 | Inflation | 2.0% | 2014 | CHINA Economic Overview The Chinese economy experienced astonishing growth in the last few decades that catapulted the country to become the world's second largest economy. In 1978—when China started the program of economic reforms—the country ranked ninth in nominal gross domestic product (GDP) with USD 214 billion; 35 years later it jumped up to second place with a nominal GDP of USD 9.2 trillion. Since the introduction of the economic reforms in 1978, China has become the world’s manufacturing hub, where the secondary sector (comprising industry and construction) represented the largest share of GDP. However, in recent years, China’s modernization propelled the tertiary sector and, in 2013, it became the largest category of GDP with a share of 46.1%, while the secondary sector still accounted for a sizeable 45.0% of the country’s total output. Meanwhile, the primary sector’s weight in GDP has shrunk dramatically since the country opened to the world. China weathered the global economic crisis better than most other countries. In November 2008, the State Council unveiled a CNY 4.0 trillion (USD 585 billion) stimulus package in an...
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...revaluation of Chinese Yuan The Chinese national economy is probably the most powerful nowadays. At least, it is the main antagonist to the American economy. A lot of experts tend to call it as the main driver of renewal of the world’s economy after the global financial crisis. A reasonable question is what the preconditions of such powerful status are. In our opinion, these preconditions are the following. First of all, it is cheap labor force. Moreover, the country has a lot of labor force, more than any other country in the world. Because of the cheap labor force the country’s products are quite cheap on the international market. That is why it is not surprising that export plays a great role in the country’s economy. Cheap labor force is not the only reason for the competitiveness of the Chinese products. Cheap Yuan is another reason, but about it we are going to talk below. Some additional information about the national economy of China can be got from the following quote. “China's economy is huge and expanding rapidly. In the last 30 years, the rate of Chinese economic growth has been almost miraculous, averaging 8 percent growth in Gross Domestic Product (GDP) per annum. The economy has grown more than 10 times during that period, with Chinese GDP reaching 3.42 trillion US dollars in 2007. China already has the biggest economy after the United States and most analysts predict China will become the largest economy in the world this century” (The Chinese Economy). As it...
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...primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period. In layman’s terms, it is a representation of the size of the country’s economy. China’s tremendous growth in GDP over the years has indeed shocked the world. With the implementation of the Chinese Economic Reform, China’s GDP has seen a tenfold increase and has even overtaken Japan to be the second largest economy after the United States. However, there is always a downside to economic progress in a country. Pollution. Not only is pollution is a huge problem in China, it is in fact a problem in many industrialised cities. China is saturated with heavy industry, metal smelters, and coal-fired power plants which are all paramount in maintaining the fast-paced economic growth it is currently experiencing; even as they generate tons of hazardous gases and soot into the air. The air pollution and smog in two of China’s biggest cities -Beijing and Shanghai- are sometimes so bad, airports are forced to shut down due to of poor visibility. That is not all, the air quality of Beijing is said to be 16 times worse than New York City. Blue skies are a rare sight and buildings several blocks away are difficult to locate, visually. Apart from that, sometimes you can't see the street from the 5th floor window in Shanghai....
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...sustaining shareholders value in the light of the above statement. The increasingly volatile global bond & equities market, challenging bank and financial environment and the weakening in Ringgit had brought a significant amount of good and bad effect to the banks and other organization in the country. It is vital for treasuries to investigate the cause and evaluate the effect of these issues to their daily operation to ensure the right strategy could be employed. Recently, volatility in global financial market hiked to its highest level since 2011 mainly due to the rapid dramatic changes in the global equities market and its contagion effect on the global bond market. According to Irwin (2015), the root of cause of this global volatility outburst was mainly China. The main reason for a slide in Chinese stock market that impacted the global market would be the concern regarding the health of the nation’s economy due to the effort of transition from an investment and export led boom economy to something more sustainable in long term by the Chinese government. Besides, the surprise move by Chinese government to devalue its currency in part of an effort to align the Yuan with market forces also contributed greatly in the volatility (The Associated Press, 2015). Chu (2015) reported that as China is an emerging economy that contribute greatly to the global growth, there will undeniably an inevitably impact on the entire global economy. Anyone who is engage with China in international...
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...market is one in which huge banks, insurance companies, corporations and other financial institutions manage the risks associated with fluctuations in currency rates by trading in large quantities. The secondary market, that is, the OTC market has developed more recently permitting retail (Smaller)investors to participate in forex markets. The OTC market has many of the same characteristics of the interbank market but it doesn’t provide the same prices, as the size of trades, and the volumes, are much smaller. Trading forex is buying one currency while at the same time selling a different currency. Some companies who do business in other countries use forex markets to convert profits from foreign sales into their domestic currency. Other reasons for trading forex include profit making, or to restrict the effects caused by currency fluctuations. Currency manipulation is the exchange rate intervention or foreign exchange market intervention. It is the purchase or the sale of the currency on the exchange market by the fiscal authority...
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...‘Cheap House Is Not Allowed’ Will China’s real estate bubble burst? Since the onset of the global financial crisis in 2007, China has faced some critical problems linked with the excess of liquidity in its internal market, due to the stimulus plan launched by the Government to soften the effects of the crisis. As a result China is now fighting against a high rate of inflation (especially food prices) and a high cost of property. While the inflation issue has been partially solved in the first term of this year, the fear for the real-estate market trend is still alive. This essay aims to critically analyse the real estate market in China, which is also strictly linked with the health of this country’s economy, by examining this issue from two different perspectives: from the point of view of those scholars who believe that the Chinese bubble will burst and from the point of view of those who believe that the Chinese market is still safe. First of all the essay will give the historical and economic background of the price rises in the Chinese real estate market, from the birth of this important economic sector to the global financial crisis. Secondly, in the core part, this paper will explain the main theory regarding the possibility of the real estate bubble burst and the counter argument. To better understand the actual situation in China there will be also a short comparison with the burst of the American bubble in 2007. In the conclusive paragraph some predictions...
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...Subcommittee, thank you for giving me the opportunity to testify on China’s exchange rate regime and its effects on the U.S. economy. This is the fifth time that I have appeared before this Subcommittee as an Administration witness. Each time I have been asked to focus on an important facet of our international economic policy. I have testified on our policy toward emerging markets, on our policy for developing countries-including reforms at the Multilateral Development Banks and the new Millennium Challenge Account, and on our policy to remove barriers to the free flow of capital in our trade agreements-including those with Singapore and Chile. In each of these cases, an underlying goal of our policy has been to raise economic growth and increase economic stability around the world, and in doing so benefit the American people with more jobs, more security, and a better life. My testimony today on China’s exchange rate regime will be no different in this respect. The Overall International Economic Strategy for Growth and Stability The Administration’s major economic endeavor now is to strengthen the economic recovery in the United States. The President’s Jobs and Growth package, enacted into law this summer, was essential, as are his proposals for tort reform, regulatory reform, and health care reform. But there are barriers to economic growth and stability in other countries- in Europe, in Asia, in Latin America, in Africa-as well as in the international trade and financial...
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...Constitutional SystemChina or People¶s Republic of China adopts socialist system or communism in their political system in their decision-making processes in governing the country.The country¶s sole political party in power is known as the Communist Party of China.The government have the sole power to control all activities done by their citizen as whathave been describe in how communism system worked in governing a country. Inother words, the purposes of working in China are to contribute to the nation and alsoto the government as the government control on all activities in the country.ii.Stability of Government. The stability of the China government is quite moderate and stable because theadministration of the government are not publicize to the public either through thepress or on the internet. So, the degree of the citizen involvement in the politics is lowbecause of the heavy restrictions impose by the government. However, the policiesimpose and the law regulations are quite effective in terms of economy where China isone of the leading countries in the world. In the recent years (2001), China has joinedthe World Trade Organization and results rapid growth in industrial and manufacturingsectors because of the cheap labor in China. But still problems such as managingenvironmental degradation, demographic pressure and the extreme immigration fromrural to urban area must be faced by the government.iii.Business FreedomThe business freedom in China is quite tight because of the regulation...
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...Answers to eThemes of the Times for Krugman/Obstfeld International Economics: Theory and Policy, 7e Chapter 1: Introduction "U.S. and Trade Partners Maintain Unhealthy Long-Term Relationship" By Louis Uchitelle, New York Times, Saturday, September 18, 2004 1. The subject of this article centers on the current account balance. Does this seem like an "international trade" or an "international money" issue? Answer: Aspects of the issue seem to overlap with both areas of international economics. The article discusses goods and services transactions [trade], as well as international borrowing and exchange rates [money]. 2. Many economists seem to be giving the issue of the current account a lot of thought. Does there seem to be a consensus in the article? Does your answer surprise you? Answers will vary. If anything, the consensus is confusion—confusion at how the deficit has persisted for so long with no severe consequences. Bergsten stands out as the most alarmed, though almost every economist seems a bit concerned about the trade deficit. This economist, on the contrary, is not concerned at all about the current account deficit, and you may come to your own conclusion upon reading further chapters. In general economists tend to agree about many big-picture issues, but may disagree occasionally where the data is open to interpretation or when more ideological considerations come into play. 3. Near the end of the article there is a logical fallacy...
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...The Chinese Music Industry’s Plight and Future At first thought, some people, including myself, would not include the music industry as part of the grand macroeconomic development blueprint. Yet music not only represents an essential part of our modern lifestyle, but also exists as a key stimulus to economic growth. Nevertheless, following the advent of the internet, rampant piracy and lack of copyright protection led the Chinese music industry into the darkest period it has ever seen. Song Ke, one of the China’s most prominent music industry gurus, has been pressured to open two Peking duck restaurants to have sustainable income. Thousands of musicians have been forced to reevaluate their lives and decide whether they would like to continue the hard labor providing free soul food for the hungry yet ungrateful people. While the Chinese music industry now faces stagnate development, unable to overcome problems such as copyright violations, lack of centralized control and coordination, through surveying and analyzing the anatomy of the problems and possible solutions, we will ultimately see why the Chinese music industry is likely to change for the better in the near future. This is important because China is undergoing the vital transition from an export-led growth model to a consumer based economy and the music industry can serve as an economic force to stimulate endogenous private consumption. Before the end of the Cultural Revolution, music in China was limited to Chinese...
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...Answers to eThemes of the Times for Krugman/Obstfeld International Economics: Theory and Policy, 7e 2 Krugman/Obstfeld, International Economics 7e Chapter 1: Introduction "U.S. and Trade Partners Maintain Unhealthy Long-Term Relationship " By Louis Uchitelle, New York Times, Saturday, September 18, 2004 1. The subject of this article centers on the current account balance. Does this seem like an "international trade" or an "international money" issue? Answer: Aspects of the issue seem to overlap with both areas of international economics. The article discusses goods and services transactions [trade], as well as international borrowing and exchange rates [money]. 2. Many economists seem to be giving the issue of the current account a lot of thought. Does there seem to be a consensus in the article? Does your answer surprise you? Answers will vary. If anything, the consensus is confusion—confusion at how the deficit has persisted for so long with no severe consequences. Bergsten stands out as the most alarmed, though almost every economist seems a bit concerned about the trade deficit. This economist, on the contrary, is not concerned at all about the current account deficit, and you may come to your own conclusion upon reading further chapters. In general economists tend to agree about many big-picture issues, but may disagree occasionally where the data is open to interpretation or when more ideological considerations come into play. 3. Near the end of the article...
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...the prospects for U.S-China trade With the significant development of economy, China has already exceeded Japan, becoming the second largest economic entity in the world. From 1949 to the present, China's economy grew annually from 4 to 10 percent. There is no doubt that the export contributes a lot to China’s GDP; meanwhile, United States just replaced the European Union, turning into China’s largest trade partner last year. It is obvious that China and U.S. are closely connected in the modern economy. Since U.S. and China are inextricably linked, I would like to analyze the trade between U.S. and China in this paper, and find out what are influencing the value of trade between the two countries. First of all, there are some economic concepts that need to be explained. China has a favourable balance of trade, which means nowadays China exports more than imports; however, U.S. has run a trade deficit every year for more than thirty years, which means U.S. imports more. The import and export are always connected with the exchange rate. For instance, if you are exporting and your local currency becomes strong then your products become more expensive for your buyers. If you are importing and your local currency becomes weak then the products you are importing become more expensive. As we can see, China is exporting more to the U.S., so I would assume that one of the reason why U.S. would import more from China may be the exchange rate of China’s currency Yuan is slumping; in the...
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...www.nitie.ac.in Volume 7 Issue 1 StreetAtNITIE In-Fin-NITIE ALSO INCLUDES: Bank Loan for Startups MSME Sector Development Global Turmoil and Indian Capital Market IN-FIN-NITIE Vol 7 Issue 1 IN-FIN-NITIE Vol 7 Issue 1 MESSAGE FROM THE CONVENOR Want to become an Investment Banker or a Financial Research Analyst Stop dreaming…Add the skill sets required to become one… IIQF is the pioneer of high-end finance education in India. It is an education initiative of top industry practitioners who have pioneered the most sophisticated financial technologies in India like Portfolio Risk Management Models and Systems and Algorithmic Trading Systems using High Performance Parallel Computing. “A mere 25% of graduates that India produces every year is actually employable. Even though India is poised to become the third largest economy in the world by 2050, out of all the graduates that pass out in an academic year, only 25% are suitable for getting inducted into the industry.” Jeffrey Fuller, Principal Advisor of Human Capital. There exists a huge gap between the skills that are required by the industry and what the Indian academic system produces. The objective of IIQF is to impart training to students in those skill-sets that are in demand in the industry and make them industry ready, or as we call them “The Street-Ready”. Certificate Program in Advanced Financial Modelling in Excel and VBA Certificate Program in Financial Modelling in Excel ...
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