Doubts In China
The figure of the exchange rate between USD and CNY with the devaluation of Chinese Yuan by 2% against US Dollar in august 2015 which continued to fluctuate up and down on approximately 6.352 (ieconomics,2015) is showed below.
This devaluation of 2% against USD is a trigger to affect Chinese economy and also the economies of the rest of the world.
The obviously advantage is the acceleration of the Chinese export that the would largest total amount …show more content…
So significant capital leaving will trigger off the chain reaction that people who see the stock market goes down significantly will also sell their shocks before the subsequently devaluation. for maintaining their money. So the price of the stock market will go down in response of this.
Also, some investors who already invest the real property and interests of saving money in bank will also seek to other stable ways to make money.
With a huge proportion of Chinese investing stock market, these draining in China financial market will effect the domestic economy negatively. As citizens and companies now are losing money, people will spend less and save more if they feel their losing money, and companies will straggle to stop or draw up the price of stock market by purchasing stock themselves,. Then they may adjust the cost and expense, like income, purchase and so forth. These changes will finally let the AD (aggravate demand) goes down, because the I(investment) and the Cd decreased. Subsequently if AD goes down, companies will product less and finally the GDP will go down, which means the economic growth will slow …show more content…
Moreover, China will not continue to devaluate its currency, because if he does, other counties who have to improve their currency’s competitive will also do that, which will finally lead to the currency war, that is unnecessary for a country who still has a strong economics growth.
However, to some extent, the decrease of import price can release the press of inflation, because goods now are cheaper. And as the exports of china now are huge and surplus, the cheaper export, to some extent, will increase the real income of the importing countries. As a result, they can buy more domestic products and then accelerate the AD.
Moreover, if China benefits from the increasing export, their citizen will be affluent, which means their AD will increase then the demand for import will inevitable increase. ‘China is already the second biggest export market for the EU (behind the US) and Britain 's sixth largest overseas market.’ (BBC NEWS,2015). If they demand more and become richer, they will buy more so other countries will benefit from it