“For the past 8 years, the Chinese yuan has maintained its fixed value against the US dollar. Of late, China has come under heavy pressure to revalue the yuan because the USA felt it was undervalued.” What factors might have contributed to the undervaluation of the yuan? [8 marks]
Chapter: Foreign exchange
Identify the contributing factors affecting the demand and supply of the Chinese Yuan currency, which will influence the value of the Yuan. By doing so, it will be more effective in assessing the possible reasons in explaining the under-valuation of the Yuan with respect to the American dollar.
07 August 2018