China Is Not The Average Economy Than The United States And Other Countries

722 Words 3 Pages
In reality, China is not the average economy compared to the United States and other countries. China is in a dangerous situation between market and state control and the yuan currency is a great example how unsafe is the place. China uses a semi-fixed exchange rate when the government keeps the value of currency within a narrow band of an exchange rate, and a semi-porous capital control, money flowing in and out, due to the dollar increasing the value of the yuan. China has tried to avoid the semi-fixed exchange rate since August, no to mention the savers will find ways to take out their money. In China’s situation, using a combination of semi-fixed exchange rate and more flow in capital controls is unpredictable. To fix this situation, China would have to use a less fixed monetary policy to push people to demand more, but the downside would be, the devaluation of the yuan currency. China’s economy is not on the border of collapsing, but the expectation of depreciation risks has become a loss of confidence, either the companies fail or China’s state-owned banks will allow them to hold on in a fine line. That is a bigger risk for China’s foreign exchange and the currency devaluation, which partook on $10 trillion in debt, estimated a tenth of it into dollars, in the past eight years. With this intention, the People’s Bank of China (PBOC) tighten the offshore market in Hong Kong by buying all the yuan so vigorously that the overnight interest rates spiked up to 67% on…

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