Renminbi currency value
Renminbi currency value is a debate affecting the Chinese currency unit, the "renminbi" ( Code:CNY). The "renminbi" is classified as a fixed exchange rate currency "with reference to a basket of currencies", which has drawn attention from nations which have freely floated currency and has become a source of trade friction with Western nations. Background. The "renminbi" was introduced in October 1949 after the Communists took power on the Chinese mainland and established the People's Republic of China. Since the Chinese economic reforms of 1978, China has become the world's biggest exporter, second largest economy  and biggest manufacturer in the world. For most of its early history, the "renminbi" was pegged to the U.S. dollar at ¥2.46 per USD (note: 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. 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. 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. However, during the onset of the 2007-2008 global 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, 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. 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. In August 2019, the central 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. International consequences. Prominent economists including World Trade Organization (WTO) Director-General  Pascal Lamy, U.S. Federal Reserve Chairman Ben Bernanke, Nobel Laureate Paul Krugman, Director of the Peterson Institute for International Economics Fred Bergsten, and Cornell University Professor Eswar Prasad have repeatedly stated that China's currency is undervalued. Peterson Institute of International Economics study said in 2010 that the yuan was 20 percent undervalued versus the dollar. An undervalued currency causes serious problems and international criticism. Chinese domestic discourse. Chinese economic reforms in the late 1970s propelled the Chinese economy from a closed centrally planned economy to one opened to foreign investments and capital, oriented to manufacturing of electrical goods, textile , toys and exports. has allowed China to become a creditor country in relations to current accounts and the largest in terms of foreign reserves. 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. 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. Others in China 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. They likened it to the unequal treaties signed after the Boxer Rebellion and the First and Second Opium Wars.