An Analysis of the U.S. Dollar Depreciation: Whether It Is Beneficial to Chinese Economy
1. Introduction
Under the environment of the Global Financial Crisis (GFC), the financial markets had a severe impingement, especially the influences to the American financial market. Meanwhile, as one of the largest American ‘trading partners’, the third largest ‘export market’, China offers USA a majority of imports and keeps close trade relation with USA (Morrison, 2011, pp2-6). It can be seen that the changes of U.S. dollar might affect the Chinese economy. In order to keep sustainable development, the Chinese government focuses on the influences of U.S. dollar alteration and considers whether it is beneficial to Chinese economy. Since 2008, U.S. dollar depreciation brings China plenty of benefits, whereas there still have a few drawbacks such as inflation and risk of debt repayment.
This project will describe the importance of the U.S. dollar, and then analyze the advantages and disadvantages of the depreciation to China. Finally, several suggestions about easing the impacts of devaluation will be provided.
2. The U.S. dollar depreciation
Since the global financial crisis began in 2008, many countries’ exchange rates experienced obvious fluctuations, especially some ‘currency depreciations’ in recent year (Kohler, 2010, pp39-50).
During the last decade, the most significant issue is the U.S. dollar devaluation in the financial markets. As the foundation of foreign exchange currency and the major currency of the international payments and foreign exchange transactions, the U.S. dollar plays a significant role in the international foreign exchange markets. Although it has supremacy in the global economic system, it is still badly hit the exchange rate of the U.S. dollar. According to the figure from ‘Exchange Rates UK’ (2011), it shows that ‘US Dollar (USD)’ to ‘Chinese Yuan (CNY)’ exchange rate has an obvious decreasing between 2008 and 2011, declining from 7.2798 to 6.3712. Therefore, more emphasis should be given to U.S. dollar devaluation for each
Under the environment of the Global Financial Crisis (GFC), the financial markets had a severe impingement, especially the influences to the American financial market. Meanwhile, as one of the largest American ‘trading partners’, the third largest ‘export market’, China offers USA a majority of imports and keeps close trade relation with USA (Morrison, 2011, pp2-6). It can be seen that the changes of U.S. dollar might affect the Chinese economy. In order to keep sustainable development, the Chinese government focuses on the influences of U.S. dollar alteration and considers whether it is beneficial to Chinese economy. Since 2008, U.S. dollar depreciation brings China plenty of benefits, whereas there still have a few drawbacks such as inflation and risk of debt repayment.
This project will describe the importance of the U.S. dollar, and then analyze the advantages and disadvantages of the depreciation to China. Finally, several suggestions about easing the impacts of devaluation will be provided.
2. The U.S. dollar depreciation
Since the global financial crisis began in 2008, many countries’ exchange rates experienced obvious fluctuations, especially some ‘currency depreciations’ in recent year (Kohler, 2010, pp39-50).
During the last decade, the most significant issue is the U.S. dollar devaluation in the financial markets. As the foundation of foreign exchange currency and the major currency of the international payments and foreign exchange transactions, the U.S. dollar plays a significant role in the international foreign exchange markets. Although it has supremacy in the global economic system, it is still badly hit the exchange rate of the U.S. dollar. According to the figure from ‘Exchange Rates UK’ (2011), it shows that ‘US Dollar (USD)’ to ‘Chinese Yuan (CNY)’ exchange rate has an obvious decreasing between 2008 and 2011, declining from 7.2798 to 6.3712. Therefore, more emphasis should be given to U.S. dollar devaluation for each