The US-China Exchange Rate Stand-Off

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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.

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Case Details:


Case Code : ECON019 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Shipping & Handling Charges extra


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Case Length : 18 Pages
Period : 2002-2007
Pub Date : 2007
Teaching Note : Not Available
Organization : -
Industry : -
Countries : China and USA


The Yuan-Dollar exchange rate has been a sore point in US-China trade relations in the early to mid-2000s, with the US government asserting that the Yuan is undervalued and that this provides an unfair advantage in trade to China. The issue has been discussed in numerous economic, foreign relations, and international trade studies.

While some analysts criticize China for not letting the Yuan appreciate against the US Dollar, others consider the low US savings rate to be the root cause of the US trade deficit with China. The case discusses the issue and attempts to analyze the impact of China's currency policy on the economies of both countries.

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  To understand the dynamics of the exchange rate mechanism

  To understand the factors that can lead to distortions in trade between two countries

  To critically analyze China's exchange rate policy

  To analyze the factors behind the US trade deficit with China


  Page No.
Introduction   1
Background Note   2
China Softens its Stand   5
Yuan's Revaluation: A Mirage?   6
The Other Point of View   7
Outlook   9
Exhibits 12


Yuan-Dollar exchange rate, Undervalued currency and Chinese economy, US Trade Deficit, US-China trade relations, Effect of pegged Yuan on US economy, Misalignment of currencies, US treasury bills, International trade, US savings, China's Foreign exchange reserves.

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