China in 2005: The Yuan Revaluation and Beyond (Page 2)

Abstract

In July 2005, China announces it is revaluing the Yuan. The long awaited move has major implications for the global economy. Economists wonder what the long-term impact of the Yuan revaluation will be. Will the revaluation help in correcting some of the imbalances in the global economy? Or will it lead to a global slowdown?

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CHINA & THE GLOBAL ECONOMY contd...

This had prompted some economists to argue that the global housing boom was indirectly "made in China". China's contribution to global GDP growth since 2000 had been almost twice as large as that of the next three biggest emerging economies, India, Brazil and Russia, combined.

China combined a vast supply of cheap labor with an economy that was unusually open for its size to the rest of the world, in terms of trade and foreign direct investment. China's total exports and imports of goods and services amounted to around 75% of its GDP. In Japan, India and Brazil, that figure was only 25-30%.

China's entry into the world economy had significantly expanded the global labor force. This had increased the world's potential growth rate and helped to hold down wages. In America, Europe and Japan, the pace of growth in real wages had been unusually weak in recent years. Indeed, measured by the creation of jobs, this was America's weakest recovery for decades....

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        Case Code   ECOA137
   Case Length    13Pages
              Period    -
 Organization     -
        Pub Date     2005
Teaching Note    Not Available
     Countries    China & World Economy
      Industry    -

Issues                 -

China, World Economy, Yuan Revaluation, Global implications of revalued Yuan, Geopolitical implications and Long-term implications.
 

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.