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Is China a Currency Manipulator?

Hassan, Tarek A., Thomas M. Mertens, and Tony Zhang.2016 “Currency manipulation is

monetary policy that is used by countries with the objective of weakening their currencies so that

they can boost their trade surpluses. Manipulation of currency occurs when one of the trading

countries purchases the U.S assets such as bonds and treasury notes making the value of the

dollar to be high”. When the dollar is made more expensive, the exports become more expensive,

making the products from foreign countries cheaper. On the other hand, a floating exchange rate

is a situation where the forex market determines the price of a country's currency based on the

demand and supply in respect to other currencies. Floating exchange rates have a profound

advantage because they leave the fiscal and monetary authorities free to move on with their

internal goals: employment, stability of price, stable growth, and the adjustment of exchange

rates.

China is perceived as a currency manipulator because it has established many businesses

in the United States and other continents. These businesses based in China in these continents

purchase assets such as notes. This purchase raises the dollar's value while the Chinese currency

loses weight, and consequently, the dollar becomes very expensive. When the dollar is in its state
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of being expensive, the U.S exports become more expensive, making the products from other

countries cheaper. China has always been deemed to be a manipulator because it wants to

import products from the U.S cheaply and at the same time make exports to be more expensive

(Mercurio Bryan, and Celine Sze Ning Leung., 2009). This phenomenon has caused China to

benefit from high profits and increased exportation of its products at high rates. China has taken

advantage of the floating exchange rate to achieve the manipulation process. China has ensured

that the value of its currency is low to the dollar. This allows China to benefit from the exchange

rates set by independent bodies. This Business strategy adopted by China has made it a currency

manipulator.
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Work Cited

Hassan, Tarek A., Thomas M. Mertens, and Tony Zhang. Currency manipulation. No. w22790.
National Bureau of Economic Research, 2016. https://www.nber.org/papers/w22790

Mercurio, Bryan, and Celine Sze Ning Leung. "Is China a Currency Manipulator: The
Legitimacy of China's Exchange Regime under the Current International Legal
Framework." Int'l Law. 43 (2009): 1257. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?
handle=hein.journals/intlyr43&section=80