The Chinese exchange rate has been thought to be undervalued for a long time, and recently, it is facing more pressure from other countries, especially U.S., because of its “negative” impact on the world economy. As long as China is a member of the WTO, the dispute over its currency exchange rate shall be subject to the WTO Agreement and IMF rule, and the U.S. has tried to put legal pressure on China under these international agreements. However, there are several obstacles to success under such legal claims. On the other side, with the process of economic interpretation, the dispute has more impact on worldwide economic development, especially China, one of the largest markets.
In this article, I tried to analysis the issue from the following points. Firstly, the article discusses whether the Chinese currency (Renminbi) is undervalued or not based on the economic development of China in the past several years. Secondly, the article explains the possibility of pushing China to increase its exchange rate under relevant international agreements, and obstacles in doing so. Lastly, by looking at the problem from an economic aspect, the article weighs the potential positive impact and negative impact on China’s economy after increasing the exchange rate. [More]