Should China revalue its currency??

First of all let us understand the matter in depth.. The fact is that china artificially keeps the
value of its currency (Yuan) low against dollar.. China is a strong economy but is largely
dependent on exports.. the major contributor of its GDP is exports... its domestic is trade is
quite low and majority of the Chinese have very less purchasing power..Most of the exports
are made to America. As we all know China is factory to world specially U.S.A. the
availability of cheap labour n resources has made china an outsourcing hub. The problem
America faces because of lower value of Yuan is that most of the goods are imported from
china, also most of the jobs are outsourced which has led to higher levels of unemployment
in America.

China should not revalue its currency because of the following reasons.. first of all china has
been showing a double digit GDP mainly because of exports. Revaluing its currency would
mean lower exports resulting in lower growth in GDP. Most of the reserves China has are in
the form of dollars. Suppose if china appreciates its currency by 10 % against dollars , it
would mean a decline in the worth of its reserves by 10 %. China even though appears to be
a strong economy it still doesn’t have sufficient reserves of crude oil and other such
resources. Such resources are traded in dollars and appreciating Chinese currency would
mean a weaker dollar. Some economists argue that if china has so much reserve its
domestic trade can be improved but the fact is that majority of the Chinese have a very low
purchasing power and the wealth is concentrated in the hands of few.

US is pressurizing china to revalue Yuan because US is facing a huge deficit. It imports

heavily from china. If china revalue’s its currency , exports will fall but only for those goods
whose substitutes are available in the Chinese market. For most of the goods US wholly
depends on china. If the prices of such goods become higher the deficit will further increase.
The only benefit US is gonna have is reduction in the levels of unemployment if china
revalue’s it currency.

However other countries like India, Brazil will have greater benefit after revaluation of yuan.
The export will be decentralized and these countries will be able to benefit. It seems very
unlikely that china will revalue its currency because it’s in no need of a stronger currency.