1. Why did the Chinese yuan depreciate against the dollar between August 2015 and December 2016? What were the benefits of the depreciation for China? What were the costs?
2. Why do you think the Chinese government tried to limit the depreciation by using dollars to buy yuan? Why did it not stop the fall in the yuan?
3. Why did conditions reverse in 2017, with the yuan appreciating against the dollar? What does this tell you about how the foreign exchange market works?
4. What could importers such as the Chinese airlines have done to limit the negative impact of a depreciation in the value of the yuan against the dollar in 2016? Should they have done this?
5. If you were a Chinese exporter, what might you have done if you had anticipated the appreciation in the value of the yuan against the dollar that occurred in 2017?

Beiween 2015 and early 2018. the Chinese cerresey, the 2015, alocat 13 times hyler than 2014, actording to buta yuan, foctuated significantly in walue against the US. complod by Alrombery. Hurdet hit wrre Chinese airlines, dollar, ziving Chioese bosinesses an object leisen in the mary of which in ported astation foed that was puid for in inportanet of manating for foreign ewhanpo finh. Sollan. As the cost of fad in terms of yuan weat wp. their the dollar to 6.95 to the dollat. This depreciation was trie compuend with 951.7 millee a year eatlier. The big throe pered by a slowdown in the Chinese econorro which lod to stane-whed airliost-China Southern Airlines Ca China government ipent heavily io try to prop up the value of the bilton yun in forigenestaye currency losses in 2015. yuan, using $1.5 trillion of Sollardenominated foreigh In 3017, confitions revened. Ferween Janury 2017 decline in iss value apainst the dollar. While the depreciation in the yuant booded eports, it to 6.27 to the dillar. The appreciation was dee lo a numb also recultod in an unarticipated increase in the ywan price ber of facten, inclating a tetum to stroeger gruwth in of kry imports, which raiod costs for a number of Chinese China and the elletion of Donald Trump in the United 3st and tesulied in an eutfow of capital as thry sought to dt versify their toldings of fortign atsets and currency. The sollat also fill after members of the Trunit adminitration made statements sugzeting that they were happy to see it sectine, becwuse they believed is boosted US. exports. The approciation in the value of the year aginat the dot lar from Jataary 2047 onward redoces the yuan coste fir Chinese companies that imporied soods priced in dollars. wach as aviation focl. Thus. Air Clina noted in its 2017 at mal report that a 1 pertent gain in the yean apinut the revenbock can boos its bet profits by about 280 million yuan, primanly due to reductions in the cost of aviation fuel. On the sether hand, the appreciation of the yuan raised the dollar price of Chincse exports. Matr ceporiers saw their profits squeexed as a result. In early February 2018. Guanedodeg Goworld, a surplist to Apple, said in a skock exchange filing that it had suffered an estimated fortign excharge loss of 45 million ywan (US57.2 million) in Case Discussiee Qerstieas lanuary 2018 eWing to a stroger yuan. The January fipurt 1. Why did the Caises youn alpmiatr against the alone was \&qual to 94 percent of its forzign cuchangt dollar between Aspeat 20is and December 20l6? kosses for the first three quarters of 2013 . It also trant What wert the benefits of the devectiation for lated into 34 percent of iss net profits in the finat mine Chinat' What were the cente? monaths of 2017. The Shenreen-listed ecmpany manefoe- 2. Why de you think the Chinese pwernmenal tried fures and sells prinied circuit beards. liguid crystal dib to limit the Argreteiution by aving wollass to buy plays (LCDs) and ultrasonic electronic metanuring imsiruments io dectoped markets. including the U.S. guan?" Whe did in sot stap the fall in the yuant Europe, Antraliz and ligan 3. Why did coodrices ueserese in 2011, with the yuan In another ecample, a ipokespence sor Zheiang NHU Co. a peodecer of vitamink said that even as the vitamin. yoo about bos the loceign esctunge markel works" 4. What eould insonters such as the Chinese airfered milions of yuant in foreign ecthangt lowes. The bask lines have dooc to limit the nepaive impact of a problem was that the company sequtiated ollar jrices fre deprecialice in the valoe of the yuan apainst the its vitatuim in 2046 , bus by the end of 2017 , each dollar of bollar in 2016, 5hould tho huve done that sales was yielding kss fevetues a wen translated back into 5. If yw were a Cleioete exportet, what might you yuan (thanks vo the aprectiatios of the yuan. To deal with have dine if you had anticipied the apereciation thus problem, tee convery set up a tein to dicess the issut in the valae of the yuat apriat the dellar that and emploved means sych as hedging and forward euctangs. occurrod in 2017 tratcoctions to try to minimine foecipencularge rids