The Chinese Yuan: The Revaluation Dilemma
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Case Code : ECOA132
Case Length : 16 Pages
Period : -
Organization : -
Pub Date : 2005
Teaching Note :Not Available
Countries : China
Industry : -
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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.
Only a few years ago, when "the world economy" was discussed, China would at best get a brief mention. But in 2005, China was too big to ignore. Since 1978, when Deng Xiaoping first set his country on a path of economic reform, its GDP had grown by an average of 9.5% a year, faster than in any other economy in the world...
The Chinese Financial System
As the debate on the revaluation of the Yuan intensified, media attention had been drawn to China's financial system.
Even as the Chinese government privatized other sectors of the economy, it had been reluctant to relinquish control over banking. Lending had traditionally been the Communist Party's chief instrument for controlling the economy...
The Road Ahead
The Yuan had been pegged at 8.28 to the dollar since 1995. A stable currency had underpinned the country's impressive economic growth. The peg had stood China in good stead during the Asian Currency Crisis of 1997-98. But by pegging the Yuan to the dollar, China had allowed its monetary policy to be influenced significantly by America's loose monetary policy...
Exhibit 1: China
Exhibit 2: China's Economic Indicators
Exhibit 3: China's Economic Indicators (Projections)
Exhibit 4: China's GDP Growth, 1992-2004 Q1
Exhibit 5: Consolidated Fiscal Position Hong Kong, China, FY 1998-2004
Exhibit 6: China's One-Year Bank Lending Rate, %
Exhibit 7: China's Consumer Prices (% change on a year earlier)
Exhibit 8: China's Capital Account, 1994-2003
Exhibit 9: China's Current Account, 1994-2003
Exhibit 10: China's Foreign Trade
Exhibit 11: Imports and Exports of Goods and Services as Percentages of GDP
Exhibit 12: Merchandise Exports to and Imports from China 2003 ($ billion)
Exhibit 13: China's Exports, % of World Total
Exhibit 14: Trade Balance (China Vs Japan), % of GDP
Exhibit 15: China's Official Foreign Exchange Reserves, 1991-2004 Q1
Exhibit 16: China's Exchange Rate
Exhibit 17: China's Renminbi Real Trade Weighted Exchange Rate Index 1994-2004
Exhibit 18: Yuan Shift China – one year CNY/US$ NDFs