In an article published in World Economic Forum, and written by Tomas Hult, Byington Endowed Chair, Director of the International Business Center in the Eli Broad College of Business at Michigan State University, and one of the world’s leading authorities on international business, international marketing, strategic management, global supply chains, and complex multinational corporations, Dr. Hult writes about why the U.S. should not worry about China's currency.
News that the People’s Bank of China, the country’s central bank, changed its formula for calculating the reference rate of the yuan (RMB) prompted the currency to fall to a four-year low.
Essentially, the People’s Bank of China is now calculating the reference rate on a daily basis and incorporating market forces. Some financial experts argue that allowing market forces to help determine the value of the yuan is logical, while others assert that China is merely trying to boost its own exporters – at the expense of foreign companies – by making their products relatively cheaper in the global marketplace.
Many in the US are concerned that our businesses will be hurt, with some accusing China of currency manipulation.
The truth is, however, the value of the yuan doesn’t matter that much: China’s swelling middle class and its insatiable demand for foreign (and US) products and services will easily offset the impact from a cheaper yuan. For now, anyway.
For the full article, click here.