THE US-CHINA

EXCHANGE RATE
STAND-OFF
M. Soumya -20BSP1302
Satya Prathapagiri -20BSP2142
M.V.S.S.Swamy - 20BSP3016
D. Abheedheer - 20BSP0728
K.Shalini - 20BSP2194
V. Srinivas Gupta - 20BSP2714
SaiTeja.Ch - 20BSP2036
Exchange rate:
◦ An exchange rate between two currencies is the rate at which one currency can be exchanged
for another. That is, the exchange rate is the price of a country’s currency in terms of another
currency.
◦ An exchange rate has two elements: a base currency and a counter currency .
TYPES OF EXCHANGE RATE:
Some of the major types of foreign exchange rates are as follows:

1. Fixed Exchange Rate System (or Pegged Exchange Rate System).

2. Flexible Exchange Rate System (or Floating Exchange Rate System).

3. Managed Floating Rate System.

z
Forex Market

 The forex market is the market in which

participants can buy, sell, exchange, and
speculate on currencies. The forex market is
made up of banks, commercial companies,
central banks, investment management firms,
hedge funds, and retail forex brokers and
investors.
Exchange rate determination

Currency prices can be determined in two main ways: a floating rate

or a fixed rate. A floating rate is determined by the open market
through supply and demand on global currency markets. Therefore, if
the demand for the currency is high, the value will increase.
 BACKGROUND

• The fair currency bill was introduced in the US congress. The bill was introduced to allow US industry to
seek relief from damage caused by "imports that benefit from a subsidy in the form of foreign exchange rate
misalignment”.
• The US government attributed the large trade deficit with China to the Chinese government’s manipulation
of its currency, which made Chinese exports “artificially attractive”, thus giving it an unfair trade
advantage. The US cited Article IV of International Monetary Fund’s (IMF).
• The Chinese government, on the other hand, maintained that the exchange rate of the Yuan against the US
Dollar was not fixed. However, some Chinese officials agreed that their government did intervene to
maintain the exchange rate within a narrow band. But they added that a stable Yuan- Dollar exchange rate
was necessary as it promoted economic and financial stability in China.
• The international monetary system, as we know it, has been in existence since the 19th century. Prior to
1870, countries adopted different monetary systems such as bimetallism, gold, silver, and inconvertible fiat
currencies.
US-China Currency

■ The Chinese central bank announced that “the closing price of a foreign currency such
as the US Dollar traded against the Yuan after the closing of the market each working
day would become the central parity for the following working day.
■ The daily trading price of the US Dollar against the Yuan was to be allowed to vary by
as much as 0.3% each day above or below the central parity published by PBC, and the
trading prices of the non-US dollar currencies against the RMB were to be allowed to
move within a certain band announced by the PBC.
RECENT US-CHINA RELATIONSHIP:
• AS OF 2019, THE UNITED STATES HAS THE WORLD'S LARGEST ECONOMY AND CHINA HAS THE SECOND LARGEST ALTHOUGH
CHINA HAS A LARGER GDP WHEN MEASURED BY PPP.

• ACCORDING TO A 2020 SURVEY BY THE PEW RESEARCH CENTRE, 22% OF AMERICANS HAVE A FAVOURABLE VIEW OF CHINA,
WITH 73% EXPRESSING AN UNFAVOURABLE VIEW, THE SECOND MOST NEGATIVE PERCEPTION OF CHINA AFTER JAPAN.

• THE POLL ALSO FOUND THAT 24% (PLURALITY) OF AMERICANS SEE CHINA AS THE TOP THREAT TO THE US. RELATIONS WITH
CHINA BEGAN UNDER US PRESIDENT GEORGE WASHINGTON, LEADING TO THE 1845 TREATY OF WANGXIA.

• THE US WAS ALLIED TO THE REPUBLIC OF CHINA DURING THE PACIFIC WAR BUT, AFTER THE COMMUNIST VICTORY IN MAINLAND
CHINA DURING THE CHINESE CIVIL WAR, FOUGHT A MAJOR ARMED CONFLICT WITH THE PEOPLE'S REPUBLIC OF CHINA IN THE
KOREAN WAR AND DID NOT ESTABLISH RELATIONS FOR 25 YEARS, UNTIL PRESIDENT RICHARD NIXON'S 1972 VISIT TO CHINA.
 The World Trade Organization (WTO) is an intergovernmental organization
that is concerned with the regulation of international trade between nations.
The WTO officially commenced on 1 January 1995 under the Marrakesh
Agreement, signed by 123 nations on 15 April 1994, replacing the General
Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the
largest international economic organization in the world.
 China became a member of the WTO in 2001, giving it greater access to
foreign markets and helping attract foreign investors who now felt secure
about working in China’s domestic market. WTO membership integrated
China into the global trading system.

WTO
Thank YOu 