China's growth engine 1a. Introduction to China's Growth Engine China's phenomenal average annual growth rate of 9. This unprecedented growth has improved the living standards of millions of Chinese people whilst maintaining inflation at an average of 2 percent and achieving per capita GDP of 8. The Chinese economy has transformed from a centrally planned system whereby it was largely closed to international trade, to a more market-oriented economy with a rapidly growing private sector and progressive moves to becoming the world's leading economic powerhouse.
Why has Beijing acted now? Industrial production, investment and retail sales data for July were weaker than expected, while at the weekend figures showed Chinese exports tumbled 8.
After a string of weakening output growth figures going back to last year, the authorities have come intense pressure internally to address the slowdown with a dramatic policy shift. The dollar has appreciated over the past year in anticipation of the US raising interest rates for the first time since the financial crisis.
That has hit Chinese exports badly. That triggered a further fall in the currency markets. Choosing the former, it set the rate at 6.
The spot rate has responded by falling another 1. The currency moves are the biggest one-day falls in 20 years, and in particular, since China reformed its currency system in Back then, it unpegged the yuan, also known as the renminbi RMBfrom a strict tie with the dollar in favour of a looser tracking policy.
How can it help the Chinese economy?
However, controls on the currency have given Chinese businesses a high degree of predictability when they plan investments in industries heavily dependent on exports. How can this move help the yuan become a reserve currency? China is seeking to build on its reforms in an effort to have the yuan included in the International Monetary Fund IMF basket of special drawing rights SDR reserve currencies.
Its remaining controls have been a stumbling block in gaining admittance to the select group of the US dollar, the euro, the pound and the yen. The organisation said this month that significant work still needed to be done for the yuan to be considered before its next review in November.
Will it do the trick? Liu Dongmin, director of the international finance research office at the Chinese Academy of Social Sciences, said: But most importantly, this marks key progress for RMB exchange rate reform since and a major step for RMB marketisation.
Australian dollar falls to The devaluation could prompt an angry reaction from the US, which has consistently argued that the yuan is undervalueddamaging US exports. Will China export more than just cheaper goods and services? Central banks in the US and the UK are toying with raising interest rates to combat the prospect of higher inflation.
But cheaper Chinese goods will reduce inflationary pressures and keep interest rates lower for longer. Less welcome will be the export of unemployment, as Beijing effectively prices western workers out of a job to protect its own economy. Why does the Chinese currency have two names?
It is similar to referring to the pound and sterling.
Yuan, like the pound, is the name of a unit of the currency.China's currency policies since have halted the RMBs gradual appreciation giving China an artificial competitive advantage in international trade at a time when other economies continue to struggle (Batson & Johnson, ).
Distinguish between the possible causes and effects of currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the past few years that have affected the value of the Australian dollar?
Essay on Bitcoins: Revolution of Digital Currency - The internet was a phenomenon that enthralled excitement in people during the 's when the internet became public and has since evolved to become a staple of our society. A few months ago, China released its currency peg to dollar to prevent a large scale appreciation on its currency.
Hence, yuan is kept at a % daily trading band and will remain unchanged (Hurriyet Daily News, ). Essay on Bitcoins: Revolution of Digital Currency - The internet was a phenomenon that enthralled excitement in people during the 's when the internet became public and has since evolved to become a staple of our society.
causes and effects Best Essay from a First Year Student ASHVINI RAVIMOHAN This essay seeks to identify the possible causes of this increase in demand for Australian dollars results in a higher ‘price’ of the currency, in other words, an appreciation of the exchange rate.