Chinese Yuan Undervaluation And Should US Undervalue Dollar

Question

China has kept the yuan undervalued by anywhere from 15–40%, depending upon the research that has been done. It has done this to keep its currency weaker than it might otherwise be. The CFO is wondering whether further changes in the yuan versus dollar exchange rate might occur. Discuss the following with the CFO:

· Do you think the United States should attempt to do the same thing with the value of the dollar (e.g., causing it to weaken versus the yuan)? Why or why not?
· What do you think would be the pros and cons of this currency manipulation from the domestic, international trade, and relationship perspectives?
 

Summary

The question belongs to Economics and it discusses about the deliberate undervaluation of yuan by China. A random thought of whether or not the US should do the same thing has been discussed in the solution.

Total Word Count 213