2007-04-29 06:07:49 · 6 answers · asked by Anonymous in Travel ➔ Asia Pacific ➔ China
Definitely, the RMB is under valued by at least half. Remember, in 2006 China was sitting on a USD110+ billion trade surplus. In other words, China is selling more than buying & thus the demand for the RMB should be higher but the discrepency lies in the control the central government has established for the RMB.
What does the Chinese government do with all the excess money?. They invest & they invest large into US government bonds.
Since joining the WTO however, China has been under pressure to lower their control on the RMB & to allow it to float freely in the international market. This isn't going to happen anytime soon because the government understands that while China is a manufacturing country, a lot of its manufacturing standards are inefficient. Does this make sense?.
This means that yes there are a lot of small export orientated businesses in China but they are inefficient. They depend on 2 things for survival, favorable exchange rate and government subsidies (in some manufacturing sectors, its about 20%).
If the RMB were to float at RMB4=USD1 today, a lot of these manufacturing jobs will move to foreign countries like Bangladesh and India (or Vietnam) because it will not be the cheapest place to make all this products.
2007-04-29 10:11:41 · answer #1 · answered by grendeth 5 · 1⤊ 1⤋
in about 1993 the china government said there was a problem with the finance minister and fired him or he was out of his office. the reasons does not matter. this caused a shakeup of the RMB. in 1992 the exchange rate was 5.54 RMB to 1 USD$.
i have a receipt to show this dated in October of 1992.
then because of this shakeup the RMB when to 10.4 RMB to 1 USD$ because all the people were scared of the RMB. They wanted a hard currency in case the RMB fell more.
the rate then changed little by little to get to about 8.3 RMB to 1 USD$ it stayed there for a long time. this allowed the china factories to sell very cheap to the rest of the world.
i believe this was a coordinated effort by the China Government to make the RMB artificially low to make its exports compete in the world market.
In the days before the reforms when the china government owned all the factories they were run by government workers that did not have to produce they could not lose their jobs. this was not efficient. china then seeing that the old way of doing business would not cut it in the new world then allowed its RMB to fall to low levels so they can sell easy on the international market.
now the USA and the EU have decided that its time for the currency manipulation to stop and let the RMB float on the international market. the Chinese government is trying to stop this as it will pressure them to raise prices and the in-flow of hard currency from the USA and the EU will falter.
2007-04-29 09:58:40 · answer #2 · answered by jack_russell_dog 3 · 2⤊ 0⤋
RMB value is dictated by the government rather than the world economy like everyone else's currency. I think currently, it's around 7.5 RMB to $1 US dollar but the RMB should be worth much more. I think their government is realizing this and raising it slowly, but they want to keep their low labor wages as well so they still have to mandate it. RMB should probably be worth around twice as much as it is now.
2007-04-29 06:14:58 · answer #3 · answered by Dstarsboy 2 · 4⤊ 0⤋
I think $1 USD for $8 RMB is the best exchange ratio.
To the Chinese, 8 is a lucky number.
8 means prosperity and good fortune.
I personally like the US Dollar to remain strong. A strong US Dollar means I have a stronger buying power.
2007-04-30 02:02:29 · answer #4 · answered by alvinli2000 3 · 1⤊ 2⤋
RMB 6.8 = USD 1
2007-04-30 01:32:32 · answer #5 · answered by pekin1907 2 · 1⤊ 1⤋
i think it is because china is geting more respect around the globe and isnt money values depend on the respect the country gets?
2007-04-29 07:59:18 · answer #6 · answered by Alexandra 2 · 0⤊ 2⤋