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Bremner (2006)Management > Asian Management > Lectures > Independent Research > US and Chinese currency
US and Chinese currencyBusiness Week. May 3rd, 2006 The US dollar is set for a fall and when it does it could have an adverse affect on Asian countries. China, for example, is reliant on exports to the US, such as DVD players and flat-screen telebisions. If the value of the dollar crashes, the US will be able to afford fewer imports. China has been pressured to appraise its yuan, but there has been resistance, with the President, Mr Hu Jinato, arguing that the yuan needs to be kept low in order to build up the economy via exports and to absorb the 10 million-plus workers every year. Critics believe that the yuan should increase in value by 3-5% in 2006. However, Mr Zhou Xiaochuan of People's Bank of China is more concerned over the storm of inbound investments (The economy grew 10% in the first quarter of this year!), which, combined with the depreciated currency, could result in a boom and bust scenario, which would damage the economy in the long-term. Over investment and heavy lending are two examples which could hurt the economy.
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