Effects of China buying US dollar for their reserves

Discussion in 'Economics' started by Kramer_Hedge_LA, Dec 6, 2007.

  1. I have had some trouble understanding how Chinese buying of foreign currency (US dollar) causes their currency to remain low relative to the U.S. dollar.

    Is it simply because the Chinese government prints more money to fund these dollar purchases therefore lowering the value of the yuan?
  2. China keeps their currency artificially low. If it was traded on the free market, it would be at a much higher rate.
  3. Daal


    their exporters get dollars and their central bank buy all these dollars and keep them on reserve, they print the yuan yeah.they try to offset the increase of money supply by issuing bonds and keeping the bond money locked up, but they are not being effective in attracting savings on the issuing of bonds
  4. Simple supply and demand.

    They dump their freshly printed yuan, increasing supply. Then they buy dollars, increasing demand.
  5. Buying dollars increases demand for dollars or yen?