Question

What are some of the signs that can lead one to conclude that China’s currency may be undervalued?

Answer 1

The artificial boost to exports while keeping out imports; and increasing employment promoted a consistently undervalued China's currency policy. Chinese economy is highly reliant on investment infrastructure, factories and other assets; unlike the U.S. economy which is more reliant on consumer spending.

The Chinese central bank employed policies, as a whole, sent a signal to the rest of the world that the Chinese economy was slowing down. The currency policy of China moves were made to boost country's economy. When China announced the actions undertaken on its currency, the market took it as a bearish signal. International markets fell, anticipating a slowdown in country. Because China is such a big economy and a significant emerging market, the ripple effects were felt around the globe