China’sCurrency Devaluation

Kiều Linh

AGENDA

OVERVIEW

CHINA’S MOTIVATION BEHIND ITS ACTION

THE IMPLICATION OF CHINA’S DEVALUATION BEYOND ITS BORDER

OVERVIEW What is currency devaluation?

Devaluation is the decision to reduce the value of a currency in a fixed exchange rate.

OVERVIEW The impact of currency devaluation (Advantages)

1

Lead to job creation

2

An improvement in the current account

deficit.

3

Higher rates of economic growth.

OVERVIEW The impact of currency devaluation (Disadvantages)

DIS AD VAN TAGES

Cause inflation

Scare off international investors

OVERVIEW The impact of currency devaluation (Disadvantages)

DIS AD VAN TAGES

The purchasing power of citizens abroad

The cost of their debt repayments

OVERVIEW The impact of currency devaluation depends on many factors

IN RECESSION

DEMAND IS INELASTIC

LOST COMPETITIVENESS

CHINA’S MOTIVATION BEHIND ITS ACTION When did China’s currency devaluation

take place?

3 % DROP IN THE VALUE OF THE YUAN

11/08: 1,9 %; 12/08:

1,6 %; 13/08:1,1 %

THE YUAN’S SPOT

PRICES: 1.4 %

YUAN/USD = 6.115

TO BOOST THE EXPORT INDUSTRY

TO DRIVE THE FINANCIAL MARKET

TO SET UP A YUAN-CENTERED & TRADING BLOC

CHINA’S MOTIVATION BEHIND ITS ACTION

THE IMPLICATION OF CHINA’S INTERVENTION BEYOUNG IS BORDER

EVEN MORE PAIN FOR GREECE

WAR CURRENCY EUROPE

DEFLATION

A LESS COSTLY CHRISTMAS

A TOUGH TIME FOR OZ

THE BUTTERFLY

EFFECT

CHINA’S CURRENCY DEVALUATION