China has been the prime leader of 2009 in economic recovery competition. The stimulus package has helped china to have a GDP growth rte of 10% beyond the forecast of any economist across the world. China apart from stimulus package the undervalued Chinese currency has played the major role for the prolonged GDP growth of china in the past couple of decades. The stimulus package game was just for a small period of time where as undervalued yuan.
We have been reading and hearing that Chinese products have replaced the domestic products produced by US and Europe in their own shopping malls. Prime reason for this is low price of goods and services produced by Chinese manufacturers.
• Low price have been achieved by Chinese production houses due to undervalued yuan.
• Now many of you might be new to know that how undervalued currency helps a nation to increase its manufacturing and replace goods produced by other nations.
• An undervalued currency tends to make a country's goods cheaper, causing its trading partners to import more than they would otherwise.
• China has made the currency undervalued as fiscal sop for its economic growth.
• In other words china has capitalized at the cost of other nations by making its currency undervalued.
• It has increased its foreign exchange at the cost of other nations. Cheap products of china have resulted to increased unemployment of US and Europe.
• Since when products at home became costly they have no other way to cut short employees and workers to reduce their fixed cost and compete with Chinese goods.
Very recently we all heard that Chinese products have been banned by US and Europe followed with India. Since china is eating way the industrial belt of these economies through its undervalued currency.
China has been able to become number 1 in the world economy which hold US treasuries. According to data form the US Treasury Department, China held $894.8bn (£591bn) of US Treasury securities at the end of December. Roughly two-thirds of the country's reserves are believed to be in dollars and dollar-denominated assets such as gold. Very recently china have asked its citizens to buy gold and also Chinese government bought huge quantum of gold which was sold by IMF .China have been able to build this huge reserves of US treasuries due to its export competitiveness. Its undervalued currency has acted as a subsidy or fiscal sop to the exporters of China and to its manufacturers.
But now we are getting clear signals from US and other economies that to increase the valuation of yuan. Very recently U.S. President Barack Obama told this year that he will "get much tougher" with China on trade issues, including the currency. The U.S. Treasury in April also faces its annual decision on whether to formally label China a "currency manipulator," a move it has never yet taken.
