1.25 What was the exchange rate policy adopted by China after July 2005? Explain how it works. The US has declined to cite China for manipulating its currency to gain unfair trade advantages against the US. America’s growing trade deficit with China, which last year hit an all-time high of $256.3 billion, is the largest deficit ever recorded with a single country. Chinese currency, the yuan, has risen in value by 18.4 per cent against the US dollar since the Chinese government loosened its currency system in July 2005. However, US manufacturers contend the yuan is still undervalued by as much as 40 per cent, making Chinese products more competitive in the US and US goods more expensive in China. China buys US dollar-denominated securities to maintain the value of the yuan in terms of the US dollar.