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Reason And Impact Of Increase In Chinese Yuan Value Of China

5530 words - 23 pages

USE CURRENCY POLICY TO RESTRAIN INFLATION IN VIETNAM UNDER THEORY OF IMPOSSIBLE THREES
USE CURRENCY POLICY TO RESTRAIN INFLATION IN VIETNAM UNDER THEORY OF IMPOSSIBLE THREES
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VOL 108
05/2011
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VOL 108
05/2011
MAGAZINE ON BANKING SCIENCE AND TRAINING
MAGAZINE ON BANKING SCIENCE AND TRAINING

INTERNATIONAL EXPERIENCE AND PRACTICE |
REASON AND IMPACT OF INCREASE IN CHINESE YUAN VALUE OF CHINA NGUYEN XUAN HONGBanking Academy | |
After much pressure on Chinese Yuan (CNY), China made decision on increase in their currency in 6/2010. How will this increase impact on relevant objects? ...view middle of the document...

USD/CNY exchange fluctuation from June to 20/11/2010
Figure 1. USD/CNY exchange fluctuation from 2005 to 11/2010
Figure 1. USD/CNY exchange fluctuation from 2005 to 11/2010
| However, BOC also eliminates availability of suddent adjustment in large scope.On 22/06/2010, BOC increased 0.3% of exchange rate between CNYand USD to 1 USD = 6.7980CNY, which has been the first adjustment since 07/2005. On 25/06/2010, USD/CNY rate reached the peak of 5 years, when BOC fixed offical daily exchange rate of 6.7896 CNY under commitment on flexibilizing exchange rate before G-20 Summit in the end of this month. This rate increases 0.3% incomparison with rate of 6.8100 on 24/06. CNY may fluctuate +/- 0.5 incomparison with daily fixed rate. In current, CNY is adjusted daily, flactuating around this rate. USD/CNY exchange rate since 22/06/2010 is shown in Figure 2. 2. Reason of rasing CNY value Objective reason – pressure of affected economiesIt is hard to refuse outstading development of China for 10 years ago. Especially in 2009, gross export value was 1,200 billion USD, higher than one of 1,120 billion USD of Germany, make China become the leading exporter in the world. Export share of China in the world increased 10% when this one of 1999 was 3%. Despite of global financial crisis, decrease in export of China is the lowest one in comparision with other power. |
Due to both internal and external impacts, on 21/07/2005, the Chinese Government announced to increase CNY value to 1 USD for 8.11 CNY, the previous rate was 8.3 CNY. Exchange regime was also changed from fixed exchange rate to floating exchange rate with regulation. Due to this decision, CNY exchange rate decreased continuously from 8.11 to 7.8 in the end of 2006, 7.4 in the end of 2007 and 7.0 in the end of 6/2010, which means that it increases 21% in comparison with USD from 2005 to 6/2008 (Figure 1).In 7/2008, China announced to hold CNY to USD rate of 6.83 to protect domestic economy | Against global financial crisis in defiance of criticism from financial partners, especially US. China consisted to hold this rate from this date to 06/2010.Since 22/06/2010 Increase CNY value and enhance flexibility for exchange rate policyOn 19/06/2010, the Bank of China (BOC) announced to promote reform on CNY exchange rate policy to enhance flexibility for this currency’s exchange rate. BOC continues to focus on relationship between supply and demand of market, supervise floating exchange rate of interbank exchange market in announced scope. | |
Figure 3. Comparison of export share of US, Japan, Germany and China form 1970 to 2009
(unit: %)
Figure 3. Comparison of export share of US, Japan, Germany and China form 1970 to 2009
(unit: %)
| Countries. Deficit caused by trading with China of most of developed economy not only becomes more and more critical but also impacts on many social benefit groups, national “reputation”, leading that many Governments, especially US and EU, shall reduce tade...

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