Chinese Yuan is pegged to the dollar at CY8.28/$, allowed to fluctuate 1% around this peg. Peoples Bank of China keeps the Yuan at this undervalued rate with respect to the dollar, by constantly buying dollars from the open market. The policy of undervaluation on the Chinese Yuan, fuels the growth in the Chinese economy. How does buying dollars from the open market reduce the value of the yuan? How does an undervalued yuan fuel economic growth in China?