Yuan Revaluation

Being highly interested in financial on goings, I have decided to blog on, in my opinion, the biggest financial news for the week. I believe finance is of great importance to our daily activities as it fuels all economies in the world and a change in one country, especially so in an important player, will greatly affect the entire globe. This is vividly seen in the latest financial meltdown which spawned from mortgage loans in America.

In yesterday news, Li Yuanchao, a senior Communist Party official, mentioned that China is looking into Yuan policy changes. Although there are no additional details, many are speculating that China may scrap the yuan’s peg to the dollar. This speculation has intensified during the course of the month after U.S. Treasury Secretary Timothy F. Geithner delayed a report that could brand China a currency manipulator.

Today, Chinese President Hu Jintao announced China will slowly adopt a floating exchange rate system, which must be controllable and initiated by the country itself. This is in response to growing U.S. pressure on China for artificially suppressing the value of the Yuan.

In my opinion, I believe the Yuan may be undervalued and this would be an advantageous move to the world - especially to China. Firstly, with a more just system of exchange rate control, trade balances around the globe would be more fairly balanced. This shows that China is being a more responsible player on the financial stage and, in turn, would aid China’s growth to being a world power. China was deemed as being a disruptor in various places – e.g. Copenhagen submit and the genocide in Africa. This definitely greatly reduces her reputation to other nations. Hence, I greatly applaud China for revamping her currency exchange system as that would be one, of the many other steps she can do, to gain a better reputation and thus, a bigger voice in the global stage.