Consider the following excerpt from an article published The Telegraph on December 5, 2016. Yuan Depreciation Pressures
Question:
Consider the following excerpt from an article published The Telegraph on December 5, 2016. "Yuan Depreciation Pressures Likely to Remain," The Telegraph, December 5, 2016 http://www.telegraph.co.uk/news/world/china-watch/business/yuan-depreciation-pressures-remain/ "We expect the Trump administration policy to be a negative for China's exports. Under Trump the US may also push for a stronger yuan.... The Trump administration is likely to put much more emphasis than that of incumbent President Barack Obama on shrinking US trade deficits both overall and with China. This will add to pressure for a stronger since China would prefer that rather than restrictions on its exports". Please answer the following questions based on this excerpt. The Trump administration claims that a stronger Yuan (China's currency) will help to reduce the volume of Chinese imports to the United States and provide a boost to American exports to China. What is the economic rationale for this claim? Next, is it plausible that appreciation of the Yuan will lead to a larger volume of US exports to China? Suppose the Yuan appreciates with respect to the US$. What do you think will be the domestic political consequences of this appreciation in China?
Step by Step Answer:
Principles Of International Political Economy
ISBN: 9780199796182
1st Edition
Authors: Mark Hallerberg, Jeffrey Kucik, Bumba Mukherjee