how can china control the value of there own currency?

[OrganizedChaos]

china keeps there yuan pegged to the us dollar? how do they do this? do they threaten to nuke people that think its under or overvalued? why dosen't the exchange rate change with market conditions?

 

[MegaWorks]

Forget about this for now, go watch the superbowl.

 

[Mo0o]

They probably stop producing currency or pump it in depending. I bet the US helps in that department since they owe china os muich money anyways

 

[Baked]

Because they have a team of people who actually knows how econemy works.

 

[gopunk]

probably much in the same way that the US controls the value of their own currency...

 

[Baked]

Heh, then why is the USD value keep dropping?

 

[gopunk]

Originally posted by: Baked
Heh, then why is the USD value keep dropping?

i'm sure there are a lot of reasons...

 

[intogamer]

Originally posted by: gopunk

Originally posted by: Baked
Heh, then why is the USD value keep dropping?

i'm sure there are a lot of reasons...

because bush is trying to steal oil:laugh:

 

[alent1234]

I asked my teacher this question in my last class and never really got a straight answer. From what I read in the book I think that they keep enough dollars in reserve depending on the exchange rate they want. They estimate the amount of their currency in circulation and keep the appropriate amount of dollars in reserve.

 

[Einz]

Originally posted by: intogamer

Originally posted by: gopunk

Originally posted by: Baked
Heh, then why is the USD value keep dropping?

i'm sure there are a lot of reasons...

because bush is trying to steal oil:laugh:

Funny, but a more legitimate answer is the large trade deficit and the budget imbalance created by Bush. Either way, it's his fault right?

 

[zephyrprime]

I don't fully understand it myself but I know that 2 things that they do are:
buy a lot of US debt on the open market thereby keeping the price the US currency from falling the open market

and offer a fixed exchange rate for dollars.

 

[Goosemaster]

Half-life 2 style...

 

[OS]

My knowledge is this; We run huge trade deficits with China which means they have a net inflow in billions of US dollars. China's financial system is government controlled, and the trade deficits give China huge reserves of US currency. With a big ass bank account full of US dollars, they control what the exchange rate will be based on what is most beneficial to their economy, if at the expense of ours.

The peg is considered to be artificially low, a number often thrown around is as low as 40% undervalued. This peg causes the price of Chinese goods to be artificially low. Because of this peg, domestic manufacturing sometimes finds that competing finished chinese products are lower than the cost of their materials. Obviously this hurts our own industries.

Washington should probably stand up to this, but they won't take a hard stand. The government has been running mind numbing budget deficits for the past several years, and China is one of the biggest buyers of our debt. We have to play nice with China or else they won't buy our debt.