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REASON AND IMPACT OF INCREASE IN CHINESE YUAN VALUE OF CHINA

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REASON AND IMPACT OF INCREASE IN CHINESE YUAN VALUE OF CHINA
INTERNATIONAL EXPERIENCE AND PRACTICE
REASON AND IMPACT OF INCREASE IN CHINESE YUAN VALUE OF CHINA

NGUYEN XUAN HONG
Banking Academy

After much pressure on Chinese Yuan (CNY), China made decision on increase in their currency in 6/2010. How will this increase impact on relevant objects? This article aims to find reason and impacte of increase CNY value of Chine on Chinese economy and other countries, including Vietnam be carefull on exchange rate policy to avoid impact on export. According to economic researcher , adjustment on CNY value may cause instability in Chinese economy due to encouraging investment, increasing independence of economy on external factor, especially when 50% of export comes from foreign-invested enterprises in current. This is contradiction that shall be considered when selecting exchange rate.
1. CNY exchage rate development before and after increase

Value from 2005 to the date before 21/06/2010: CNY value increased due to application of margin transaction measure, holding CNY to USD rate at CNY=6.83 from 8/2007

Besides achievement of economic growth, which partly thanks to current exchange rate policy, China also has to deal with many challenges. Since 1998, China has spent 200 billion USD to refinance and buy doubtful debts of banks. China is dealing with instable finance but Chinese Government still

However, BOC also eliminates availability of suddent adjustment in large scope.
On 22/06/2010, BOC increased 0.3% of exchange rate between CNYand USD to 1 USD = 6.7980CNY, which has been the first adjustment since 07/2005. On 25/06/2010, USD/CNY rate reached the peak of 5 years, when BOC fixed offical daily exchange rate of 6.7896 CNY under commitment on flexibilizing exchange rate before G-20 Summit in the end of this month. This rate increases 0.3% incomparison with rate of 6.8100 on 24/06. CNY may fluctuate +/- 0.5 incomparison with daily fixed rate. In current, CNY is adjusted daily, flactuating
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