How docs China\'s trade surplus with America put pressure on it currency (the Yu

Question

How docs China's trade surplus with America put pressure on it currency (the Yuan or RMB) to rise, How does its central bank prevent the Yuan (RMB) from appreciating Describe the actions and illustrate on a graph. Place the US S price of 1 Yuan on the vertical axis; quantity of Yuan on the horizontal axis. ($2,000) Read this article about Germany's trade surplus. Why has Germany's trade surplus been increasing in recnt years ($1,000) Why is Germany's rising trade surplus a problem for the Eurozone & the global economy ($1,000)

Explanation / Answer

Q.6. China's trade surplus with America implies that China exports more to America when compared to import from America. IN international trade, a country makes import from and make exports to other countries. China laos makes imports from and makes exports from America. BUt here surplus arises which means china is exporting more to America than importing from it. This implies that in America demand for Chinese goods is more than demand of US goods in China. With high demand of exports from CHina, the American importers have to make high payments of exports in Chinese currency (Yuan). And because of this the it is putting pressure on Yuan to appreciate.

However the central bank of China is trying hard to limit the appreciation of Yuan. China's central bank engineered the recent decline in the country's currency as part of its efforts to prepare the tightly tethered yuan for wider trading. In the past week, the People's Bank of China has been guiding the yuan lower against the dollar by setting a weaker benchmark against which the yuan can trade. It has also intervened in the currency market by directing state-owned Chinese banks to buy dollars, according to traders. That has helped further push up the price of the dollar against the yuan.

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