Renminbi Value Increase Pros and Cons

Posted by Sara M. Varese

The chinese are contemplating whether they should increase the value of their currency, the Yuan, or otherwise known as the Renminbi. Although this may superficially sound good for the Chinese economy, it may actually not be a good thing.  When the value of the yuan is low in compared to other currency, such as the dollar, Chinese goods seem cheap, encouraging exports which is good for their economy.

However, if the yuan increases in value, then the opposite effect may happen: their good may seem expensive, discouraging foreign countries to import Chinese goods.  This may result in stimulating domestic trade and the creation of more domestic jobs.

Recently, the Vice Commerce Minster of China has hinted that they may announce a trade deficit because they are importing a lot more raw materials such as copper and crude oil but exporting less.

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