THIS IS THE ? -China currently fixes its exchange rate to the US dollar (when the value of the dollar goes up, the value of the yuan goes up, and when the value of the dollar goes down, the value of the yuan goes down). Who do you think benefits from this linkage and who loses, and why?

THIS INFO BELOW WILL HELP......PLZ HELP

THE ECONOMIC WAR BETWEEN THE US AND CHINA

We now move to the complicated relationship between the United States and China. Many Americans fear China's growing economic power in the world and regret the strong role it now plays in the US economy. The US depends on China for much of its manufactured goods, and China is the fastest-growing economy in the world as of 2011. China's economy is a major world focus on currency markets and within political circles. The world's richest country, the United States, now sees China as a threat and a potential aggressor on a whole new battlefield: the economy.

China's currency unit is theRMB, orRenminbi, but Chinese money is still most commonly referred to under the old nameyuan. China keeps the value of the yuan tied at a fixed rate to the US dollar (when the value of the dollar goes up, the value of the yuan goes up, and when the value of the dollar goes down, the value of the yuan goes down). One effect of this strategy is that the yuan is artificiallydevaluedon the world market. Among other things, this is a way of encouraging other nations to import the cheap Chinese goods, promoting China's manufacturing sector. Some Westerners, however, see this artificial devaluation as an act of political and economic warfare.

The close economic co-dependence of the ideological enemies (the US is a democracy and China is a totalitarianism) has led to the popularity of the termChimericato describe the strange combination of these two powers as world leaders, with China producing and lending and America consuming and borrowing. A "chimera" is a big imaginary monster, so the term Chimerica is a complex pun. The idea is that these two nations - the two with the highest growth economies in the world and the two that account forone thirdof the world's gross domestic product - are a monstrous symbiotic organism that the world is very afraid of. If China were to decouple from this symbiotic relationship, many fear, it could be disastrous not just for both countries (the US in particular), but for the entire world economy.

Partly because they are so dependent on each other, China and the US are now engaged in a new kind of Cold War. China now controls the world's largest foreign-held portion of the US debt, in the form of US treasury bills (a type of bond). This means that the Chinese have a real tool of leverage over the US, but also that the Chinese cannot really afford to have the US economy collapse.

The Chinese are concerned by the excessive printing of new dollars in the United States. The US Federal Reserve is acting to effectively reduce the value of all those US dollars the Chinese hold in debt. China has threatened the US back with hints that they may sell-off of their US treasury bills on the world financial markets, thus devaluing the US dollar and further undermining the US ability to finance its growing need for money. It seems unlikely that the Chinese will go through with it, though, as their own economy would be severely damaged by this action.

The US meanwhile has tried to force China to increase the value of the yuan by threatening trade sanctions on Chinese exports. The Chinese want to keep the value of the yuan low relative to the US dollar in order to keep domestic production and their export machine running at full tilt. The US wants to see the yuan go up, because then the value of the US dollar would decline, and ironically this would be good for the US economy in some ways: the market value of the US debt to China would be reduced and it would stimulate domestic production and export and counteract some of the effects of the American recession.

China has in fact recently taken steps to allow the value of its currency to rise in the world markets, not as a response to US threats but as a measure to reduce the growing threat of rising inflation that comes with China's increase in imported food and raw materials as its economy continues to grow. If China were simply to de-link the yuan from the US dollar and let it rise in currency markets as it would do naturally based on the strengths of its exports, trade imbalances would eventually resolve themselves. But it would hurt some investors, foremost of which is the Chinese government, and impact the Chinese export industry.

The net effect of the relationship that has developed between the US and China is increased world power and economic influence for China. As the 21st century progresses it will be interesting to watch how the balance of power between the world's richest (and most heavily armed) nation and the world's most highly populated and fastest-growing superpower plays out.