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1. What degree does China manage its economy and monetary policy well. Provide support.

The relationship between China'scurrency and economy is interesting becauseits export-dependent economic system works differently fromthat of other countries.The last 10 yearshaveseen substantialchange, the most remarkable of which has been the opening up of the Chinese economy. Major reforms have increased China'smarket orientation. The periodhas seen themonetization of a variety of resourcesand their availability to the open market, which has attracted large-scale foreign investment. Theresources includemanufactured goods, infrastructure, technologyand natural resourcesas well as human capital and labor. There has been an increase in demand for the Chinese currency, which stimulated commercial bank lendingand finally increased the money supply. The money supply has risensignificantly over the last 10years. During high and consistent growth rates,China managed the increasingmoney supply effectivelywhile keeping the currency rates stable.

China is the second largest and fastest growing economy inthe world. The nationhas a unique socialist open-market economy. China's government retains tightcontrol but remains open to free market forces.As a manufacturing and export-driven economythat receivestremendous amounts offorexcapital for its exports,the Chinese currencyforex rates also impact the country'smoney supply.China's policiesdiffer from conventional methods used by other countries because of the country's unique economic system.

Asa manufacturing and export-driven economy, China runs atrade surplus. It sells more to the world than it purchases. Chinese exporters receiveU.S. dollars (USD) for their exportsbut mustpay for local expenses and wages in local currencyyuan or renminbi (RMB). Due to the huge supply of U.S. dollarsand the demand for yuan, the rate of yuan can rise against the U.S. dollar. If that happens, Chinese exports become costlier and lose their competitive price advantage in the international market.This is problematicfor the Chinese economyresulting in lesser or no sales of manufactured goods, widespread unemployment and economic stagnation. The Chinese central bank PBOC intervenes to avoidthis situationandkeeps the rates lower through artificial measures.The country's central bank uses several different tools to influence interest rates and money supply in the economy.