renminbi currency value

{{Main|Renminbi}}

The renminbi was introduced in October 1949 after the Communists took power on the Chinese mainland and established the People's Republic of China.{{Cite web|title=China's Economic Development from 1860 to the Present: The Roles of Sovereignty and the Global Economy|url=http://www.forumonpublicpolicy.com/archive07/thomas.pdf|publisher=Forum on Public Policy|access-date=26 October 2010|author=Stephen C. Thomas|year=2006}} Since the Chinese economic reforms of 1978, China has become the world's biggest exporter, second largest economy and biggest manufacturer in the world.{{Cite web|last=Rachman|first=Gideon |title=China can no longer plead poverty|url=http://www.ft.com/cms/s/0/3b2c922a-e06a-11df-99a3-00144feabdc0.html|publisher=The Financial Times Ltd|access-date=26 October 2010}}{{Cite news|last=Associated Press in Tokyo |title=China overtakes Japan as world's second-largest economy|url=https://www.theguardian.com/business/2010/aug/16/china-overtakes-japan-second-largest-economy|publisher=Guardian News and Media Limited|date=16 August 2010|location=London}}

For most of its early history, the renminbi was pegged to the U.S. dollar at ¥2.46 per USD. During the 1970s it was revalued, until it reached ¥1.50 per USD in 1980.

Its value gradually declined as China embarked on a new economic course during Deng Xiaoping's leadership and transformed into a more market-based capitalistic economy.{{Cite web|last=CHANG|first=Gene Hsin |title=Estimation of the Undervaluation of the Chinese Currency by a Non-linear Model|url=http://www.hkimr.org/cms/upload/seminar_app/sem_paper_0_183_Chang-paper060503.pdf|access-date=26 October 2010|date=2006-05-03}}{{Cite web|title=China's Renminbi Revaluation: Small Step, Big Impact?|url=http://knowledge.wharton.upenn.edu/article.cfm?articleid=2538|publisher= Wharton School of the University of Pennsylvania|access-date=26 October 2010|author= Knowledge@Wharton|date=July 7, 2010}}

Since 2005, the Chinese government has overturned its previous policy of pegging the Renminbi to the US dollar. The renminbi now floats within a small margin compared to a basket of currencies selected by the Chinese government.{{cite journal |id={{ProQuest|236659652}} |last1=Kim |first1=Frances |title=CRITICAL ANALYSIS: THE RMB'S EXCHANGE VALUE |journal=Yale Economic Review |volume=5 |issue=2 |date=Summer 2009 |pages=22–23 }} This is seen as a move to a more fully free-market floating of the Renminbi. The Renminbi has appreciated 22 percent since the mechanism reform in 2005 of the Yuan exchange rate.{{Cite web|last=English.news.cn |title=Chinese vice premier talks economy with U.S. treasury secretary|url=http://news.xinhuanet.com/english2010/china/2010-10/24/c_13572906.htm|archive-url=https://web.archive.org/web/20101027071548/http://news.xinhuanet.com/english2010/china/2010-10/24/c_13572906.htm|archive-date=October 27, 2010|publisher=Xinhua News Agency.|access-date=26 October 2010}} However, during the onset of the 2008 financial crisis, the renminbi was unofficially repegged to the US dollar. It was again depegged from the dollar in June 2010.

After 2010, the exchange rate floated in line with fundamentals,{{cite news|first1=Paul|last1=Krugman|access-date=2019-08-06|title=Trump's China Shock|url=https://www.nytimes.com/2019/08/05/opinion/trumps-china-shock.html|newspaper=The New York Times|date=2019-08-05}} staying mostly between 6 and 7 CNY per USD. In 2018, the renminbi lost value as China's exports were targeted by USA tariffs and markets had doubts about the strength of the economy.{{cite news |title=U.S. Labels China a Currency Manipulator, Escalating Trade War |url=https://www.bloomberg.com/news/articles/2019-08-05/u-s-treasury-department-labels-china-a-currency-manipulator |work=www.bloomberg.com}} Such a depreciation is typical of a country whose exports are at risk, as shown by the drop of the pound after Brexit, and in July 2019 the IMF found the yuan to be correctly valued, while the dollar was overvalued.{{cite news|url=https://uk.reuters.com/article/uk-usa-trade-china/china-media-says-u-s-destroying-international-order-after-currency-manipulator-branding-idUKKCN1UW04O|archive-url=https://web.archive.org/web/20190806050759/https://uk.reuters.com/article/uk-usa-trade-china/china-media-says-u-s-destroying-international-order-after-currency-manipulator-branding-idUKKCN1UW04O|url-status=dead|archive-date=August 6, 2019|title=China media says U.S. 'destroying international order', after currency-manipulator branding |author=Winni Zhou |author2=David Stanway |author3=Cheng Leng |author4=Yawen Chen |author5=Andrea Shalal |date=2019-08-06|work=Reuters}} In August 2019, the People's Bank of China (PBOC) let the renminbi fall over 2% in three days to the lowest point since 2008 as it was hit by strong sales after threats of further USA tariffs.

An undervalued currency causes serious problems and raises international criticism. Prominent economists including World Trade Organization (WTO) Director-General Pascal Lamy,{{cite web|title=WTO's Lamy says worried by currency interventions|url=https://www.reuters.com/article/us-trade-lamy/wtos-lamy-says-worried-by-currency-interventions-idUSTRE69T14Q20101030|publisher= Reuters|access-date=2023-05-21|date=2010-10-30|archive-url=https://web.archive.org/web/20230521170431/https://www.reuters.com/article/us-trade-lamy/wtos-lamy-says-worried-by-currency-interventions-idUSTRE69T14Q20101030|archive-date=2023-05-21}} U.S. Federal Reserve Chairman Ben Bernanke,{{Cite web|url=https://www.federalreserve.gov/newsevents/speech/bernanke20101119a.htm|title=Rebalancing the Global Recovery|last=Bernanke|first=Ben|date=19 November 2010|website=Federal Reserve|publisher=Board of Governors of the Federal Reserve System|access-date=9 April 2018}} Nobel Laureate Paul Krugman,{{Cite web|title=Taking on China|url=https://www.nytimes.com/2010/03/15/opinion/15krugman.html|work= New York Times |access-date=15 April 2011|author=Paul Krugman|date=14 March 2010}} Director of the Peterson Institute for International Economics Fred Bergsten,{{Cite web|title=China's yuan value hits U.S. economy, two experts say|url=http://www.washingtontimes.com/news/2010/mar/15/chinas-yuan-value-hits-us-economy-experts-say/|publisher= The Washington Times LLC|access-date=15 April 2011|date=15 March 2010}} and Cornell University Professor Eswar Prasad{{Cite web|title=Prasad Says China Should Allow Some Degree of Yuan Gain|url=http://www.blinkx.com/watch-video/prasad-says-china-should-allow-some-degree-of-yuan-gain/bzvPAexfkDBa7aKzegaLnA|publisher= Bloomberg Inc.|access-date=15 April 2011|date= 8 February 2011}} have repeatedly stated that China's currency is undervalued.

In 2007, proposed US legislation estimated undervaluation to be between 15% and 40%,House of Representatives, [https://www.congress.gov/bill/110th-congress/house-bill/1002/text H. R. 1002: A bill to authorize appropriate action if the negotiations with the People’s Republic of China regarding China’s undervalued currency and currency manipulation are not successful], introduced on 12 February 2007, accessed on 4 December 2024 and the Peterson Institute study said in 2010 that the yuan was 20 percent undervalued versus the dollar.{{Cite web|title=China Yuan Undervalued by 20% Versus Dollar, Peterson Study Says.|url=http://www.businessweek.com/news/2010-11-09/china-yuan-undervalued-by-20-versus-dollar-peterson-study-says.html|publisher=BLOOMBERG L.P.|access-date=3 March 2011|author=Simon Kennedy |date=9 November 2010}}{{dead link|date=April 2023|bot=medic}}{{cbignore|bot=medic}}

1. As a member of the WTO and IMF, China's undervalued renminbi would violate Article XV(4) of the General Agreement on Tariffs and Trade Article 1, and 3{{Cite web|title=THE GENERAL AGREEMENT ON TARIFFS AND TRADE|url=http://www.worldtradelaw.net/uragreements/gatt.pdf|publisher=WTO|access-date=15 April 2011}} of the WTO Agreement on Subsidies and Countervailing Measures,{{Cite web|title=Subsidies and countervailing measures|url=http://www.wto.org/english/tratop_e/scm_e/scm_e.htm|publisher=WTO|access-date=15 April 2011}} and Article IV Section 1 of the IMF that prohibiting countries from currency manipulation.{{Cite web|title=Article IV - Obligations Regarding Exchange Arrangements|url=http://www.imf.org/external/pubs/ft/aa/aa04.htm|access-date=15 April 2011}} However, the USA Treasury in 2018 cleared China from the accusation of currency manipulation.{{cite news|access-date=2019-08-05|title=China not a currency manipulator according to U.S. Treasury's...|url=https://www.reuters.com/article/us-usa-trump-china-yuan-idUSKCN1MM02E|newspaper=Reuters|date=2018-10-12}}
2. The trade dispute with the U.S. would be worsened by an undervalued renminbi.{{Cite news|title=Value of yuan likely to dominate U.S.-China trade talks|url=https://www.nytimes.com/2007/05/20/business/worldbusiness/20iht-trade.1.5785427.html|publisher=New York Times LLC|access-date= 15 April 2011|author=Joe McDonald|date=20 May 2007}}
3. An undervalued renminbi could cause inflation. In an effort to hold the value of the yuan comparatively low, the government has to buy foreign currencies through trade surpluses and investment. China's foreign reserves, already the world's biggest, soared to $2.8 trillion at the end of 2010. In order to buy foreign currencies, the government has to print the RMB "at a furious pace" and therefore incur inflation.{{Cite news|title=Chinese Foreign Currency Reserves Swell by Record Amount. The New York Times|url=https://www.nytimes.com/2011/01/12/business/global/12yuan.html|work=The New York Times|access-date=15 April 2011|author=Keith Bradsher|date=11 January 2011}} However, between 2012 and 2019, China's inflation has been reported to be persistently low, around 2%.{{cite web|access-date=2019-08-05|url=https://www.bloomberg.com/opinion/articles/2019-03-11/china-s-inflation-problem-it-s-too-low-and-going-lower|title=Don't Underestimate China's Low-Inflation Headache|date=2019-03-11|author=Daniel Moss|newspaper=Bloomberg}}
4. An undervalued renminbi would contribute to very large portfolio foreign capital inflows, motivated by expectations of quick appreciation, adding pressure for the currency to rise.{{Cite SSRN |ssrn=578903|title=Adjusting China's Exchange Rate Policies |author=Morris Goldstein|year=2006}}
5. An undervalued renminbi would undermine domestic consumers' purchasing power when it comes to goods from outside the country. An undervalued currency makes foreign goods more expensive in terms of yuan.{{cite news |id={{ProQuest|614066381}} |last1=Stevenson |first1=Tom |title=Flexibility will allow RMB to support local economy |url=https://www.investmentweek.co.uk/investment-week/feature/1720518/flexibility-allow-rmb-support-local-economy |work=Investment Week |date=5 July 2010 }}{{cite news |last1=Garnaut |first1=John |title=Wave of change to hit China's economy |url=https://www.smh.com.au/business/wave-of-change-to-hit-chinas-economy-20101025-170v1.html |work=The Sydney Morning Herald |date=25 October 2010 }}

Chinese economic reforms in the late 1970s propelled the Chinese economy from being a closed centrally planned economy to one open to foreign investments and capital, oriented to manufacturing of electrical goods, textile, toys and exports. These reforms have allowed China to become a creditor country in relations to current accounts and the largest in terms of foreign reserves.{{Citation needed|date=October 2012}}

China maintains that the value of the renminbi is market-driven. China says that its population receives high savings from the structure of the economy, and that gradual increase in domestic consumption is important for its own growth.{{cite news |id={{ProQuest|250258913}} |last1=Spence |first1=Michael |title=The west is wrong to obsess about the renminbi |url=https://www.ft.com/content/00f770a8-06cb-11df-b058-00144feabdc0 |work=Financial Times |date=21 January 2010 }} While the Chinese have argued that their exchange rate is purely a domestic policy matter, economists have begun to suggest that Chinese policy will soon shift to accelerate appreciation of the Yuan in order to reduce domestic inflation and to increase the wealth of Chinese citizens.{{cite video | title=Will the Yuan Rise? The Chinese Story| url=https://www.youtube.com/watch?v=OHBAZI64XYc |archive-url=https://ghostarchive.org/varchive/youtube/20211221/OHBAZI64XYc |archive-date=2021-12-21 |url-status=live| date=2011-06-08}}{{cbignore}}

Others in China{{who|date=March 2014}} view this dispute as an attempt to ring in China's economic development as part of a strategy for economic imperialism of the industrialized world led by the United States.{{Cite web|author=Huang Shuo|title=How China will break US ring-fence|url=http://www.chinadaily.com.cn/opinion/2010-10/01/content_11372938.htm|publisher=chinadaily.com.cn|access-date=26 October 2010|date=1 October 2010}} They likened it to the unequal treaties{{Cite book|title=Voyages in World History, Volume 2|year=2008|publisher=Cengage Learning|isbn=978-0-618-07725-0|url=https://books.google.com/books?id=klcYZE-jE74C&q=chinese+economy+unequal+treaty&pg=PA694|author=Valerie Hansen|author2=Kenneth Curtis |access-date=26 October 2010|page=694}} signed after the Boxer Rebellion and the First and Second Opium Wars.{{Cite web|last=Lourie|first=Richard|title=Bullish on the Bear |url=http://www.themoscowtimes.com/opinion/article/bullish-on-the-bear/420906.html|publisher=The Moscow Times.|access-date=26 October 2010|date=25 October 2010}}

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Category:Economy of China

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Currency value