How the Chinese Central Bank could peg the Yuan to the dollar by printing Yuan and buying dollars (building up a dollar reserve). Created by Sal Khan.
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Finance and capital markets on Khan Academy: This tutorial walks through how China's undervaluing of its currency impacts trade and prices (which also fuels cheap borrowing for the U.S.).
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In which way does the Chinese Central Bank manipulate its currency? If it liberates the Chinese Yuan, would the Chinese people even have more money to buy everything in the world than they do it today? See the Canadian house bubble. Everywhere are the Chinese.
What about demand push inflation in China? Won't the increased money supply mitigate any benefit to their business? The price of the doll will go up in China, which will then be offset by the decrease in the cost of the Yuan. You will be left with roughly the same situation you started with, no? I think the real Chinese advantage is derived from lower labor costs and less regulation, both of which are passed onto the American. Am I wrong? I don't see how currency manipulation could have any tangible effects.
The printed yuan doesn't go to U.S., it goes to the seller in china who wants the yuan. The chinese person has $100 that needs to be converted to yuan and the american guy only has 500 yuan. But to get a 10 to 1, there needs to be 1000 yuan for $100 so the central bank of china print another 500 yuan and sell it to the chinese guy for his dollar.That's why china holds so much of American dollars in reserve.
I think you think China is afraid of US invading China? I seriously doubt a war will break out between 2 nations that both holds ICBM.
Another reason I think is because China is trying to gain leverage with the US's wall street/corporate elites, whom is the true masters of the nations. As long as they are rich, they will promote stability policy between US and China, and stability can only benefit China in the short and long term.
Something I don't understand, if China wants to peg its currency to 10-1 for dollar, so they print more Yuan, but where does the newly printed Yuan go? In theory the Yuan should go to USA to buy the dollars to keep the currency peg balance right? But last time I check US holds almost no Yuan reserve, and where does this Yuan end up? Who receives the printed Yuan after it is being printed?
We already do, it is called quanative easing, and so far we have printed more than 1 trillion, and if you think it will only hurt China then you are dead wrong, foremost, it will hurt the American people by inflation, have you notice how much food and gas other have gone up in price during the past 2 years or so? The same thing goes for global commodity market.
But guess who benefited the most? The elite 1% who is able to capture this money cheaply first and massively increase their wealth.
Khan, Thanks a ton. But if this keep going wont a weakening US economy diminish the Chinese export demand and make a counter effect. Or does it mean that even with artificial Chinese currency valuation US is still in reality growing that the Chinese exports are still growing in the US? Sorry I cant connect here. Again thanks a ton for all your work. Good luck!
the claim that cheap yuan will lead to more export in dollar term clearly ignore the price elasticity of chinese exports--given that they are necesscity, the elasticity is likely to be low (Joseph Stiglitz agrees on WSJ). Just like no one would argue that the low price of oil adds to the competitivelness of oil-exporting country and lead to their trade-surplus, we have to rethink when we claim cheap yuan leads to trade surplus. The fact that this claims is repeated does not mean it is true.
Unless American workers are willing to spend 11 months per year in a dorm working 6 days a week 12 hours plus a week with no benefits, safety laws or unions while being paid a 1/10 or 1/100 the salary a American worker is willing to be paid, THEN cost's aren't going to go down people.
Regarding the trade imbalance problems, read Buffet's "Squanderville versus Thriftville" or watch I.O.U.S.A.
@marcabela By artificially devaluing one's currency, you are making your exports cheaper in other countries which makes their demand higher (and making other countries' good more expensive in your own). This will clearly stimulate demand for exports which would stimulate investment in factories, etc. domestically which will create growth. This is what export-lead growth is.
Although foreigners may now invest in A-shares, there is a monthly 20 percent limit on repatriation of funds to foreign countries.
Performance of A-shares.
Since its inception in 1990, including a major reform in 2002, the index has seen great fluctuations. Overall, however, it has grown along with the Chinese economy. The years 2015 to 2016 were a particularly difficult period, with a 52-week performance of -21.55 percent as of July 20, 2016.
As China grows from an emerging market to an advanced economy, there is substantial demand for Chinese equity. Stock exchange regulators continue efforts to make A-shares more broadly available to foreign investors and have them recognized by the global investing community.
In June 2017, the MSCI Emerging Markets Index announced a long-awaited decision it would add stocks to its index. According to CNBC, MSCI will add 222 China A Large Cap stocks to its benchmark emerging markets index gradually beginning in 2018. The MSCI website reveals the stocks it will list include the Bank of China, China Merchants Bank, Guotai Junan, Ping An Insurance, according to a document on Tsingtao Brewery, SAIC Motor, Suning Commerce and Spring Airlines.
Current Dividend Preference.
Participating Preferred Stock.
Convertible Preferred Stock.
Cumulative preferred stock includes a provision that requires the company to pay preferred shareholders all dividends, including those that were omitted in the past, before the common shareholders are able to receive their dividend payments.
Non-cumulative preferred stock does not issue any omitted or unpaid dividends. If the company chooses not to pay dividends in any given year, the shareholders of the non-cumulative preferred stock have no right or power to claim such forgone dividends at any time in the future.
Participating preferred stock provides its shareholders with the right to be paid dividends in an amount equal to the generally specified rate of preferred dividends, plus an additional dividend based on a predetermined condition. This additional dividend is typically designed to be paid out only if the amount of dividends received by common shareholders is greater than a predetermined per-share amount. If the company is liquidated, participating preferred shareholders may also have the right to be paid back the purchasing price of the stock as well as a pro-rata share of remaining proceeds received by common shareholders.
Significance to Investors.