Wednesday 9 December 2015

China's economy will be the biggest loser by the strong dollar


The strong dollar will inevitably have a negative effect for some countries. The biggest loser, however, will not be American but Chinese economy. The main reason for this is that the yuan was bounded to the US currency to improve their financial stability.
So when the dollar grows versus other currencies, expectations are for a recent increase in interest rates in the United States. The increase, however, applies to the Chinese currency. The problem for Beijing is that the suffering from slowdown second largest economy in the world is twice more dependent on trade than the US.

“It’s a problem,” said Yukon Huang, a senior associate at the Carnegie Endowment for International Peace in Washington and a former World Bank country director for China. “Excessive appreciation at a time when the economy is sinking is a bad thing.”

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