Difference between revisions of "Chinese Foreign Economic Policy"
David Gibson (talk | contribs) (New page: Despite being lead by the Chinese Communist Party, The People's Republic of China has gradually liberalized its foreign economic policy since 1978 and the rise of Deng Xiaoping. Before the...) |
David Gibson (talk | contribs) |
||
Line 1: | Line 1: | ||
Despite being lead by the Chinese Communist Party, The People's Republic of China has gradually liberalized its foreign economic policy since 1978 and the rise of Deng Xiaoping. Before the mid 70's, the PRC was relatively autarchic, largely due to Chinese isolation after the Sino-Soviet split and the Cultural Revolution, when China suspended all diplomatic ties. In 1978, Deng Xiaoping started his policy of "Reform and Opening up" which started the gradual transformation of China's economy from relative autarchy and central planning, to an open, liberal, free market economy. In 2001, China became a member of the WTO, and now has the second largest economy in the world, behind the United States. | Despite being lead by the Chinese Communist Party, The People's Republic of China has gradually liberalized its foreign economic policy since 1978 and the rise of Deng Xiaoping. Before the mid 70's, the PRC was relatively autarchic, largely due to Chinese isolation after the Sino-Soviet split and the Cultural Revolution, when China suspended all diplomatic ties. In 1978, Deng Xiaoping started his policy of "Reform and Opening up" which started the gradual transformation of China's economy from relative autarchy and central planning, to an open, liberal, free market economy. In 2001, China became a member of the WTO, and now has the second largest economy in the world, behind the United States. | ||
− | ==China's Foreign Monetary Policy== | + | == China's Foreign Monetary Policy == |
+ | Up until 2005, China maintained a fixed exchange rate regime, pegging the value of the Renminbi to the US Dollar. In July of 2005, the People's Bank of China announced that it would remove the Reminbi's peg against the dollar, and allow its value to be determined by a basket of currencies which included the Euro, the US Dollar, the Japanese yen, and the South Korean won, among others. In the three years that followed, the value of the yuan rose by 21%. Then in July 2008, the China's central bank reinstated the peg to the dollar in response to the deepening of the global financial crisis, especially in the United States. This move was likely done to caution against large capital flows that could destabilize China's economy, a lesson that China by watching the rest of Asia learn during the Asian financial crisis of 1997-1998. Chinese policy-makers attribute the fact they were largely unaffected by this crisis to their currency peg. Until June 2010, China maintained its currency peg by buying US Dollars and maintaining its capital controls that limit the convertability of the yuan, slowing down any "hot capital" that could potentially destabilize their economy. Then on June 19, 2010, in a move seen largely to divert pressure from the United States to revalue the yuan, the People's Bank of China again announced that it discontinue the Renminbi's peg to the dollar and resume its highly managed float based on a basket of currencies. | ||
− | + | ||
+ | <br> |
Revision as of 21:02, 8 October 2010
Despite being lead by the Chinese Communist Party, The People's Republic of China has gradually liberalized its foreign economic policy since 1978 and the rise of Deng Xiaoping. Before the mid 70's, the PRC was relatively autarchic, largely due to Chinese isolation after the Sino-Soviet split and the Cultural Revolution, when China suspended all diplomatic ties. In 1978, Deng Xiaoping started his policy of "Reform and Opening up" which started the gradual transformation of China's economy from relative autarchy and central planning, to an open, liberal, free market economy. In 2001, China became a member of the WTO, and now has the second largest economy in the world, behind the United States.
China's Foreign Monetary Policy
Up until 2005, China maintained a fixed exchange rate regime, pegging the value of the Renminbi to the US Dollar. In July of 2005, the People's Bank of China announced that it would remove the Reminbi's peg against the dollar, and allow its value to be determined by a basket of currencies which included the Euro, the US Dollar, the Japanese yen, and the South Korean won, among others. In the three years that followed, the value of the yuan rose by 21%. Then in July 2008, the China's central bank reinstated the peg to the dollar in response to the deepening of the global financial crisis, especially in the United States. This move was likely done to caution against large capital flows that could destabilize China's economy, a lesson that China by watching the rest of Asia learn during the Asian financial crisis of 1997-1998. Chinese policy-makers attribute the fact they were largely unaffected by this crisis to their currency peg. Until June 2010, China maintained its currency peg by buying US Dollars and maintaining its capital controls that limit the convertability of the yuan, slowing down any "hot capital" that could potentially destabilize their economy. Then on June 19, 2010, in a move seen largely to divert pressure from the United States to revalue the yuan, the People's Bank of China again announced that it discontinue the Renminbi's peg to the dollar and resume its highly managed float based on a basket of currencies.