One might claim that the yuan has been manipulated since the start of the trade war...

One might claim that the yuan has been manipulated since the start of the trade war to stimulate Chinese exports (the current US president has definitely done so). What do you think?

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Expert Solution

The trade war had started in the month of June 2018. Before the beginning of a trade war between the USA and China, the value of 1 USD was 6.346 on 1 May, 2018. After more than one and half year of trade war, value of 1 USD is 6.9638 Yuan as on January 1 2020. It shows that Yuan has depreciated from the value that was beyond the war. on the basis of these findings, it can be said that Yuan has been manipulated so that its value decreases and Chinese exports increase. But, it is true only up to limited extent. Because, it is not that Yuan has only depreciated, but also it is US dollar, that has also appreciated. It is done by increase in the interest rate in the USA during the mentioned period and investors reached out to USA for investments. It caused increase in demand of USD and led to increase in its value. As a result, 1 USD requires relatively more number of Yuan.

Further, decreasing the value of Yuan is also not going to help China increase its exports to the USA due to trade war conditions. At the same time, China's export to other nations are not so volatile that China needs to manipulate its currency value. Hence, decreasing the value Yuan, is partly due to Chinese government's policy. Besides, it is the US government and world economic scenario that can lead to fall in the value of Yuan.

Rahul Sunny answered 1 year ago

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