Question

“Others Skimp While China's Coffers Swell” By Didi Kirsten Tatlow, NYT, November 2, 2011
“BEIJING — [A] bill passed recently by the U.S. Senate … aims to label China a currency manipulator. …
“For nearly a decade, the value of the renminbi has been the subject of increasingly acrimonious debate on Capitol Hill, a source of frustration for China’s trading partners …..
“China is a political scapegoat,” said Xiang Songzuo, deputy director of the Center for International Monetary Research at Renmin University of China and a former official at China’s central bank, the People’s Bank of China. Other governments, he said, ‘have to find some excuses for their own incompetence in managing their own economy and country.’”

a. Identify what China has been doing to its currency.
b. Explain how China has implemented this currency policy.
c. Explain why China has been pursuing this policy.
d. Identify the name of the tradition in political economy that advocates using policies like this one to “win” in the international trade game.
e. Identify the term used to label policies that a nation adopts to guard its domestic producers from international competition.
f. Xiang Songzuo cites other governments “incompetence in managing their own economy” as the source of the problem: To what incompetent U.S. policy is he referring? Explain the connection between this U.S. policy and the China currency policy.

Please type the answer if you can

Answer 1

1. China has been weakening its currency against the U.S. dollar. There has been a continuous devaluation of the CNY in the last few years after 2014.
2. China redeemes foreign currency at the current exchange rate and since it has to hold a lot of forex to do that, China holds U.S. Treasury instruments instead of dollar bills as Treasuries can be sold faster and much more easily than dollar bills. This helps China to manipulate its exchange mechanism.
3. The major reason why China has been devaluating its currency is to fuel the growth of its exports which in turn boost economic growth. Economics experts also say that China is also paving the path to becoming a global currency by replacing U.S. dollar.
4. NA
5. The term is the devaluation of a currency.
6. NA