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Convert Send Charts Alerts. We use midmarket rates These are derived from the mid-point between the "buy" and "sell" transactional rates from global currency markets. They are not transactional rates. Learn more. View full chart. A number of economists have questioned the quality of China's massive investment efforts over the past two years and the ability of local government to repay the loans they took out to fund major investment projects.
Thus, the importance of fixed investment to China's economic growth over the next few years could decline. The Chinese government's 12 th Five Year Plan states that rebalancing the economy, promoting consumer demand, boosting rural incomes, addressing income disparity such as boosting wages , promoting the development of the services sector, and expanding social welfare programs such as education, social security, and health care will be major priorities. Such policies, if implemented, could provide a significant boost to consumer spending.
Based on China's historical economic model, it will likely take several years for a significant rebalancing of the Chinese economy to occur. In addition, many economists have raised concerns that, as China's major trading partners, such as the United States and Europe, begin to experience more rapid economic growth, their demand for Chinese products will increase, which could discourage China's government from following through on economic reforms necessary to promote a rebalancing of the economy.
The official name of China's currency is the renminbi RMB , which is denominated in yuan units. Both RMB and yuan are used interchangeably to describe China's currency. These were government-sanctioned foreign exchange adjustment centers established in to allow a limited amount of trade in foreign exchange, although the central government intervened to prevent the RMB from strengthening beyond 6 yuan per dollar.
Source: U. Overseas investment by Chinese citizens is tightly regulated and restricted by the central government. For example, it would be very difficult for a Chinese citizen to open a savings account in another country or invest in shares of foreign stocks without permission from the government.
Limiting capital outflows from China is a key policy tool of the central government to control exchange rates within China. In addition, some analysts contend that China fears that an open capital account would lead to capital flight, which could undermine its financial system. It was later announced that the composition of the basket would include the dollar, the yen, the euro, and a few other currencies, although the currency composition of the basket has never been revealed.
If the value of the yuan were determined according to a basket of currencies, however, it would not have shown the stability it has had against the dollar between mid and mid, unless the basket were overwhelmingly weighted toward dollars.
The fact that the currency has appreciated some days but has depreciated on others raises a number of questions as to the extent and pace the PBC will allow the RMB to appreciate over time. Many observers believe that this is a sign that appreciation of the RMB will happen over a long period of time, but in an unpredictable way in an effort to limit RMB speculation and inflows of "hot money," which could destabilize China's economy.
A trade-weighted index reflects the relative importance of each partner's trade with China. The index itself is calculated as the geometric weighted averages of bilateral exchange rates. Thus the dollar accounts for a significant portion of the index—it averaged 19 points out of from to , while the euro averaged In general, U.
China emerged as the world's largest merchandise exporter in accounting for These rankings have stayed constant through The current account balance is the broadest measurement of trade flows because it includes trade in goods and services. It also includes income flows and current transfer payments. China's accumulation of foreign exchange reserves in the first quarter of was 3.
Note, the IMF's July estimates of China's current account surpluses as a percent of GDP in and were different than the estimates it made in April at 2. Fred Bergsten and Joseph E.
Gagnon, December Scott, August 23, Note, some have criticized the methodology used in the report, which assumes that the U. New York Times, December 31, Krugman also estimated that China's currency policy caused 1.
Many members sharply criticized the Department of the Treasury's decision in April to delay issuing its first exchange rate report usually issued in March or April. That report was issued on July 8, after China made its announcement on currency reform , and it did not cite China or any other country for currency manipulation. Testimony by C. Of particular concern to some groups are proposals that would require the U. A September 22, , letter sent by a group of U.
A number of U. Some petitioners have argued that when Chinese exporters are paid in dollars and subsequently exchange those dollars for Chinese RMB, the payment RMB they receive is larger than would occur under market conditions because of the Chinese government's intervention to keep the RMB artificially low against dollar. This policy is viewed as constituting a financial contribution or price support. The Commerce Department has yet to include an undervalued currency as part of its countervailing duty investigation.
In one case involving imported aluminum extrusions from China, which included a charge by petitioners that China's undervalued currency was a countervailable subsidy, the Commerce Department stated that additional study of the issue was needed, given the unique nature of the alleged subsidy and the complex methodological issues that it raises under U.
The benefit would be defined as the difference between the amount of foreign currency received by the exporter from the transaction and the amount that would have been received if the currency was not undervalued. In other words, the undervalued currency could be considered to be a measure that is contingent upon export performance. Real effective exchange rates are defined as a weighted average of bilateral exchange rates, adjusted for inflation.
Under U. In such cases, Commerce uses price information from "surrogate countries" that have a market economy to determine the normal value of the imported products in question. Some analysts contend that this practice results in higher antidumping rates on imports from nonmarket economy countries than on those from market economy countries.
Takatoshi Kato , September 30, China's currency issue was also a major topic under the U. The multilateral approach may also act as an inducement for China to reform its currency policies.
If other economies especially Asia agree not to intervene in currency markets to prevent their currencies from appreciating or depreciate them to gain a competitive edge against Chinese exporters , China might agree to quicken the pace of currency appreciation and reform. If China went ahead and appreciated its currency, other Asian economies might do the same.
This might help minimize Chinese concerns that an appreciating currency would disrupt its export sector. This is often referred to as the real or equilibrium exchange rate and is broadly based on assumptions of what exchange rates would be predicted to be in order to be consistent with a country's fundamental macroeconomic conditions. Cline, William R. The ERER approach estimates an equilibrium real exchange rate for each country as a function of medium-term fundamentals, such as the net foreign asset NFA position of the country, relative productivity differential between the tradable and non-tradable sectors, and the terms of trade.
The ES approach calculates the difference between the actual current account balance and the balance that would stabilize the NFA position of the country at some benchmark level. The MB approach calculates the difference between the current account balance projected over the medium term at prevailing exchange rates and an estimated equilibrium current account balance, or "CA norm.
The semi-annual series of estimates of FEERs was coauthored with [author name scrubbed] until his retirement. House of Representatives, March 24, Some analysts contend that U. Trade varied from year to year. In , U. The current global economic slowdown led to a sharp reduction in U. As a result, the U. Depending on the elasticity of demand for the product, some might be willing to pay the extra price and buy the same level as before, some might buy less of the product, and some might stop purchasing the product altogether.
Some of the costs may have been borne by Chinese producers or workers. Alternatively, China might have been able to boost efficiency, thus lowering costs, or production could have moved inland where labor is less expensive.
The Case of Apple's iPod , March He also argues that reducing the federal budget deficit in the long run is the best way to boost employment and states that "in comparative importance, the value of the RMB is a footnote. Bureau of Economic Analysis, personal consumption expenditures is the primary measure of consumer spending on goods and services in the U. See U. The standard economic model for determining whether countries should have a floating exchange rate is the "optimal currency area" model.
According to this model, two countries can gain from fixed exchange rates if their goods and labor markets are highly interconnected and their business cycles are closely synchronized.
By these criteria, China and the United States are unlikely to form an optimal currency area. Many such firms contend that China's currency policy constitutes one of several unfair trade advantages enjoyed by Chinese firms, including low wages, lack of enforcement of safety and environmental standards, selling below cost dumping and direct assistance from the Chinese government.
This trend is much larger than the Chinese currency issue and is caused by numerous other factors, including productivity gains in manufacturing such as through new technologies and the rise of employment in the service sector. From to , China's holdings of U. China has expressed concern in recent years over the "safety" of its large holdings of U. It has criticized the U. Federal Reserve's easy monetary policies to boost economic growth, such as quantitative easing involving large-scale purchases of U.
Treasury Securities. Chinese officials claim that such policies could lead to a sharp devaluation of the dollar against global currencies and boost U. Fair, Ray C. There have been numerous reports of labor unrest and strikes in different parts of China in , mainly over pay issues. Chinese officials are concerned that an appreciation of the RMB could induce Chinese export producers to try to hold down wages to remain competitive, or could force them out of business, which could lead to more job losses and provoke more unrest.
Some recent media reports indicate that data on the level of Chinese exports in may be overstated because some entities in China may be filing fake export invoices in order to transfer capital to China. The ultimate goal of trade is to obtain imports in exchange for exports. The more imports a country can obtain from a given level of exports, the better off it is materially. China appears to be willing to "subsidize' its exports in order to boost jobs in export-oriented industries. However, Chinese consumers are made worse off.
The government can and has attempted to sterilize the increase of the money supply by forcing state banks to buy and hold government bonds. Some economists argue that short-term movements in floating exchange rates cannot always be explained by economic fundamentals.
If this were the case, then the floating exchange rate could become inexplicably overvalued undervalued at times, reducing increasing the output of U. These economists often favor fixed or managed exchange rates to prevent these unexplainable fluctuations, which they argue are detrimental to U.
Other economists argue that movements in floating exchange rates are rational, and therefore lead to economically efficient outcomes. They doubt that governments are better equipped to identify currency imbalances than market professionals. Alternatively, if Chinese citizens proved unconcerned about keeping their wealth in Chinese assets, the removal of capital controls could lead to a greater inflow of foreign capital since foreigners would be less concerned about being unable to access their Chinese investments.
This would cause the exchange rate to appreciate. To some extent, China can reduce the effects of the accumulation of foreign reserves on the money supply through credit controls, although this is unlikely to be completely effective. Others in Congress, however, continue to view the large and growing U. Department of the Treasury press release, Third Meeting of the U.
The current account balance is the broadest measurement of a country's financial flows. It includes the balances for trade in goods and services, net income investment income and compensation for overseas workers , and net unilateral transfers.
A current account deficit also reflects that a country consumes more than it produces, while a current account surplus indicates that a country produces more than it consumes.
China's current account surplus as a percent of GDP fell each year from to Gross private savings as a percent of GDP rose from Source: Bureau of Economic Analysis. This is not to say that Chinese wages have not gone up in recent years. Source: EIU. Chinese house consumption is also repressed because of the lack of an adequate social safety net.
This forces them to maintain a high rate of savings in order to pay for medical costs, education, and future retirement costs if they don't have a pension. Topic Areas About Donate. Download PDF. Download EPUB. Topic areas Economic Policy Foreign Affairs. Can it Be Accurately Estimated? Consumers and Certain Producers Effect on U.
Borrowers Net Effect on the U. Current Account Balances: Figure A Annual Growth in Real Chinese and U. Private Consumption: Figure A Tables Table 1. Appendixes Appendix. Indicators of U. Summary China's policy of intervening in currency markets to limit or halt the appreciation of its currency, the renminbi RMB , against the U. Introduction and Overview of the Currency Issue China's policy of intervention to limit the appreciation of its currency, the renminbi RMB against the dollar and other currencies has become a major source of tension with many of its trading partners, especially the United States.
Notes: Change in average annual exchange rates. Notes: Percent change over the previous year. Is China a "Currency Manipulator? The IMF and Currency Misalignment The IMF's Decision on Bilateral Surveillance over Members' Policies set new guidelines on exchange rate policies and identified certain developments that could affect global external stability, including exchange rate policies which in turn could trigger a thorough review by the IMF and possible consultations with an IMF member.
Footnotes 1. The exchange rate went from 6. Source: Kantar Media. Do not show again. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. Dow Jones. Advanced Charting Compare. Open 0. Historical Prices. Advanced Charting. NY Closing Exchange Rates. These are the highest points the exchange rate has been at in the last 30 and day periods.
These are the lowest points the exchange rate has been at in the last 30 and day periods. These are the average exchange rates of these two currencies for the last 30 and 90 days. These percentages show how much the exchange rate has fluctuated over the last 30 and day periods. Send money online fast, secure and easy. Create a chart for any currency pair in the world to see their currency history.
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