Someone asked me at dinner what would happen if the US dollar was not "pegged" to the Chinese Yuan? What would happen to our economic climate if anything and how would it affect the imports and exports of goods and services?
Although I had read the answer several times, I had difficulty explaining myself and felt embarrassed. Is there a simple way to answer this question?
2006-07-05 17:27:14 · 4 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
It would probably follow the usual J curve effect for revaluations. When it got revalued in 2005, it moved from 8.28 to 8.11. This would make imports more expensive for the US and exports (what little we have) look cheaper.
In the very short term, businesses won't change the volume, so the trade balance will get worse for a while with higher prices and the same volume. Over time, businesses will adjust the volume and the trade balance should get slightly better (less imports, more exports) since the currency has made imports more expensive now.
2006-07-06 03:45:47 · answer #1 · answered by Arbitrage 7 · 0⤊ 0⤋
Revalue or remove pegging of Yuan will decrease China to export casue it would cost importer to pay more. It's s economic assumption
Less export mean..
factory closing down ...
Chinese people losing job...
Destablizing economic condtion...
People get angry...
Domino effect all the way to the Government of China
2006-07-06 00:39:20 · answer #2 · answered by Poor and Hungry57 2 · 0⤊ 0⤋
A revalue Yuan will make the dollar weaker. We can export more and reduce the trade deficit. On the other side of the coin is Imports will cost us more
2006-07-06 00:34:43 · answer #3 · answered by Timothy Summer 3 · 0⤊ 0⤋
We will end up paying off treasury debt purchased by China at a discount.
2006-07-19 23:54:35 · answer #4 · answered by Norman 7 · 0⤊ 0⤋