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This is because numerous studies have shown; that those nations that remove their peg against the dollar will see consistent economic growth after this occurs. This is due to the fact that market forces are able to make adjustments to the financial system (which allows them to function smoothly). Evidence of this can be seen with the average rate of growth in nations who embraced this policy on year later with a 4.7% GDP rate. This is important, because it is showing that despite the fears that China has about what will happen, the reality is that it will have positive impact on the economy. As, the nation is able to more effectively adjust to changes on a real time basis; which helps to fuel even more growth down the road.
However, Eichengreen believes that this kind of approach should be taken over a series of different steps. The reason why, is because the imbalances in China's situation are so extreme that they could cause sudden shifts in the economy. To deal with these issues, the author believes that the peg should be removed through a series of two different steps. Once this takes place, is when this will address the...
This is when the negative impacts will be reduced, by giving everyone a chance to prepare for the changes in advance. Once this occurs, it will cause China's GDP growth to decline slightly, while helping the economy to make the necessary adjustment. This is the point that China will be able to have more consistent and balanced growth that will transform the nation.
Bibliography
China Media Like Yuan, 2011, Reuters. Available from: [11 October 2011].
Congress Tackles Chinese Currency Manipulations, 2011, Fox News. Available from: [11 October 2011].
Forcing Yuan Appreciation, 2011, China Daily. Available from: [11 October 2011].
The Kind of Currency Manipulation the U.S. Likes, 2011, WSJ. Available from: [11 October 2011].
Curtan, J, 2011, China's Currency Manipulation, Yahoo Finance. Available from: [11 October 2011].
Eichengreen, B, 2010, 27 Up the Implication of China Abandoning its Dollar Peg.
Harvard Format http://libguides.library.uwa.edu.au/harvard
Bibliography
China Media Like Yuan, 2011, Reuters. Available from: <http://www.reuters.com/article/2011/10/11/us-china-usa-currency-idUSTRE7991FC20111011?feedType=RSS&feedName=topNews> [11 October 2011].
Congress Tackles Chinese Currency Manipulations, 2011, Fox News. Available from: <http://www.foxnews.com/politics/2011/10/01/congress-tackles-chinese-currency-manipulation/> [11 October 2011].
Forcing Yuan Appreciation, 2011, China Daily. Available from: <http://www.chinadaily.com.cn/usa/business/2011-10/10/content_13863157.htm> [11 October 2011].
The Kind of Currency Manipulation the U.S. Likes, 2011, WSJ. Available from: <http://blogs.wsj.com/chinarealtime/2011/10/12/the-kind-of-chinese-currency-manipulation-the-u-s-likes/> [11 October 2011].
Curtan, J, 2011, China's Currency Manipulation, Yahoo Finance. Available from: <http://finance.yahoo.com/blogs/daily-ticker/tom-friedman-china-currency-manipulation-good-bad-america-133027114.html> [11 October 2011].
Harvard Format http://libguides.library.uwa.edu.au/harvard
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