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“Recently China allowed their currency to fall below the key level of 7 yuan per dollar.“ China isn’t devaluing their currency, they are supporting it at its c
by melling 7y ago
“Recently China allowed their currency to fall below the key level of 7 yuan per dollar.“
China isn’t devaluing their currency, they are supporting it at its current level and artificially keeping it above 7.
When they stop supporting it, it decreases in value. Where would their currency go if they stopped propping it up?
- varjag 7y agoDo they? All complaints I heard so far is CCP keeps yuan artificially cheap to prop the exports.
- CharlesColeman 7y agoThey have in the past (to fuel/build their export-driven economy), but I think things might have changed recently with the trade war.
- dragonsh 7y agoTrade war is one reason, other is external debt in USD. This is explained in great details in article that China needs 100 billion dollars every year to service its external USD debt. So they don't want to let CN¥ fall in value significantly.
- simonh 7y agoThe really pivotal change was the financial crisis. Before that the Yuan was at over 8 to the dollar.
- deleted 7y ago[deleted]
- seanmcdirmid 7y agoThat hasn’t really been true since before the Asian financial crisis.
- s1artibartfast 7y agoI think you have it backwards. If they stop supporting it, it will go down towards 6 yuan per dollar. If you own or want to buy a yuan, 1/6 USD is more value than 1/7 USD, hence the term devalue.
- melling 7y agoNope. If they stop supporting it, it will get weaker and move towards 8. https://www.npr.org/2019/08/05/748155575/chinas-currency-falls-to-lowest-exchange-rate-in-11-years https://www.npr.org/2019/08/05/748155575/chinas-currency-fal... “China has long artificially propped up the value of its currency above the symbolic 7-to-1 threshold using a mixture of public and non-public methods, including ordering its massive state-run banks to buy up vast amounts of currency to strengthen the yuan, also known as the renminbi. "The [Chinese] government has been, if anything, doing the opposite: protecting the renminbi from collapsing," says Jonas Short, head of China research at NSBO, an investment bank. "If you allow for the natural exchange rate for renminbi against the U.S. dollar, it should be about 7.2 to 7.3 per dollar."
- seanmcdirmid 7y agoNo, you have it backwards. China has been keeping their currency artificially strong to avoid capital flight and a crisis in consumer confidence. So for the last ten years, it has been closer to 6 RMB/usd than 7 RMB/usd. This couldn’t last, and the yuan’s natural market value was closer to 7, even above 7 and maybe even 8. If China does nothing, the RMB falls in value, not rises.
- s1artibartfast 7y agoPlease read the parent comment I was replying to again. >So for the last ten years, it has been closer to 6 RMB/usd than 7 RMB/usd. This couldn’t last, and the yuan’s natural market value was closer to 7 This was an artificial devaluing of their currency. It is called devaluing because it makes Yuan cheaper to buy (more exports from china) and USD harder to buy (less imports to china). From the title article: "China bids up the price of the dollar relative to the yuan by buying dollars with yuan, and then sits on these dollars". >This couldn’t last, and the yuan’s natural market value was closer to 7, even above 7 and maybe even 8. If China does nothing, the RMB falls in value, not rises. Historically, without interference, Yuan increases in value relative to the dollar (<7 RMB/usd). This makes Yuan harder to buy (Less exports from china) and USD cheaper to buy (More imports to china). This what the title article is discussing. Some believe that China has switched from devaluing to propping up the Yuan recentlyt https://www.npr.org/2019/08/05/748155575/chinas-currency-falls-to-lowest-exchange-rate-in-11-years https://www.npr.org/2019/08/05/748155575/chinas-currency-fal... >China's yuan plunged to below 7 per U.S. dollar on Monday morning
- rdlecler1 7y agoCurrency controls lead to capital flight and therefore add to devaluation pressures. But the first cause is currency control on the first place.
- acdanger 7y agoDoesn't letting it "fall" in the number of yuan per dollar actually mean it's stronger, i.e. more valuable?
- thaumasiotes 7y agoThe number of yuan per dollar getting lower does mean that the yuan is becoming stronger relative to the dollar. (It doesn't mean the yuan is becoming stronger; it could just be that the dollar weakened.) But that would be called a "rise" in the yuan. A "fall" in a currency always means the opposite, that the value of the currency has dropped. In the usage you're questioning, the yuan "fell" to 7+ to the dollar from its previously higher value of 6+. It's not a reduction in the number of yuan per dollar.