This article will discuss the Chinese challenge to the Chinese Dollar and the future of the dollar in the Chinese market. As the largest economy in the world, China is very important to the United States economy and as a result the United States must maintain an excellent relationship with the Chinese people. However, the current government of China is doing everything possible to prevent the economic collapse in China and have created a large stimulus plan.
Recently, the central bank of China announced a major move in regards to their currency, which is now called the Yuan. They have decided that the currency will be based on the American Dollar, and they will be the only one issuing this currency. They will be issuing one Yuan for every US dollar, which has caused a huge stir in the current economy of the United States.
Of course the Central Bank of China has not released the exact numbers as of yet but the US dollar has lost value tremendously since then. As of now the Chinese economy is still growing however, the demand for labor is very low, which makes the economic situation of the economy much worse than before.
So, what is the Chinese Challenge to the Dollar all about? Well as you can see there are several reasons why the Chinese want to change the current economic system that they have in place.
First of all the currency is worth far less in China than it is in the United States. In fact the current Chinese economy is estimated to only grow by around 3% per year. Therefore the Chinese economy is not growing as rapidly as many people would like them to. For instance they have been working hard to get the inflation under control and it is proving to be difficult because China’s inflation rate is higher than the United States.
Second, the currency has lost so much value over the last couple years that they may not be able to continue issuing the currency if they do not want to get rid of it. Also they want to make sure that the Chinese are comfortable with it before they allow the Yuan into their market. Last but not least, they are also trying to increase their gold and silver reserves. Because the gold and silver are not as valuable as gold and silver are mined from gold mines, they have less of a need to use them in their economy.