Impact Of Chinas Yuan Revaluation

Abstract

In the past two years, the Bush Administration, members of Congress and a few senators, such as Sen. Charles Schumer of New York and Sen. Lindsey Graham of South Carolina and others have put pressure on China to abandon her peg the Chinese Yuan to the U.S. Dollar. These efforts finally succeed. On July 21, 2005, Peoples Bank of China announced that the Chinese Yuan is no long pegged solely to the U.S. dollar, instead, the Yuan is now linked to a basket of currencies, including Dollar, the Euro, the Japanese Yen, the Korean Won and other currency from any country that had at least $10 billion trade with China. In this paper we ask the questions: what is the impact of China Yuan revaluation decision? Does this means that China no long stockpile U.S. Treasury Bills? The American consumers can no longer benefit from the low-priced consumer goods manufactured in China? And in what way the U.S. economy will be affected, if at all?