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Why China Manipulates Its Currency

Over the last few years, economists have talked a lot about China's currency manipulation. Using simple terms and informative charts, this presentation explains how and why the world's second largest ...

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Why China Manipulates Its Currency

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  1. WHY CHINA MANIPULATES THE YUAN

  2. China is a CURRENCY MANIPULATOR.

  3. This isn’t an INDICTMENT.

  4. It’s a FACT.

  5. Here’s the real PURCHASNG POWER of the Yuan vs. the Dollar… Source: Federal Reserve

  6. See how it’s gone DOWN? Source: Federal Reserve

  7. This isn’t a MISTAKE

  8. Over the last 4 decades, China has INTENTIONALLY DEVALUED the Yuan

  9. Its central bank PRINTS YUAN.

  10. Then uses it to BUY U.S. DOLLARS.

  11. This increases the SUPPLY of Yuan in currency markets... (which DECREASES the price of a Yuan.)

  12. …and increases the DEMANDfor U.S. Dollars. (which INCREASES the price of a Dollar.)

  13. This means that China owns A LOT OF DOLLARS

  14. Here are China’s foreign currency reserves… Source: Federal Reserve

  15. $3.8 trillion They’ve gone from $5 billion in 1981 to $3.8 trillion today! $5 billion Source: Federal Reserve

  16. In the process, China has become the world’s largest holder of foreign exchange reserves.

  17. By a LONG WAY…

  18. Foreign Exchange Reserves Source: Wikipedia

  19. Why does China do this???

  20. China’s economy is based on EXPORTS.

  21. And it sells more exports if theYuan is cheap.

  22. It’s the reason you can buy a Teenage Mutant Ninja Turtles “Combat Shell” for only $11.39 from Target.* *This example is provided for illustrative purposes only. Source: Target.com

  23. Which is a good deal when you consider…

  24. It looks “just like a Ninja Turtle’s shell.” Has room to fit “ninja combat gear weapons.” And showcases your “fiercest ninja moves.” Source: Target.com

  25. An artificially cheap Yuan is also one of the main reasons that China’s GDP has done this…

  26. $7.3 trillion China’s GDP in current U.S. dollars… $61 billion Source: Federal Reserve

  27. So, why does China manipulate the Yuan?

  28. It does so to BOOST EXPORTS.

  29. Which, in turn, FUELS ECONOMIC GROWTH.

  30. It’s really as simple as that!

  31. Photo credits… SeanPavonePhoto/iStock/Thinkstock Liang Zhang/iStock/Thinkstock Techin24/iStock/Thinkstock Henry Gan/Photodisc/Thinkstock Nebojza/iStock/Thinkstock

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