Currency War: China

Author : Carnesia Deswara Chandra (1801400480)

The currency war is still continues, with Euro as the loser to USD. While China facing various difficulties in reaching their expected economic growth by 7% which would be the lowest economic expansion in approximately 25 years for the Asian country. The situation might get worse before it gets better as for instance investment, consumption and production growth levels have fallen and became an extremely bad sign. This slow growth rate of China will lead to an impact that will be felt all over the world.

Strengthened by the lower expected inflation rate, many of China's banks eased its monetary policy. China more likely to weaken the yuan. a weaker yuan would help prop up export earnings, boosting growth and create jobs in an economy that grew at its slowest pace in 2014. China's central bank allowed yuan to gradually decline and it has fallen 2.3% against dollar since the last November. In this situation, the world's focus would be the decision made the USA, if everyone is going to reduce their currency values, it would be an economical suicide for USA if they decided to increase their interest rate and make the USD more appealing to foreign investors.

Premier Li Keqiang said in a report to lawmakers that the exchange rate would be kept at reasonable and balanced level. While avoiding currency weakness, policy maker relied on interest-rate cuts and reduced reserve requirement at banks to support economic growth. While the others are trying to reduce their currency values, China quietly trying to steal more and more of the global market. In order to win the battle, China did various efforts to win its favor and become the leading offshore for reminbi transaction is well chronicled, and now China is promoting Yuan as world beating. Yuan accounts for 2.6% of global transaction and that's up from 1.39% a year ago. If US lose the currency war, China will likely to be the long term winner.