China, on last Monday had dropped its currency Yuan to the lowest value it had reached since the year 2008. The currency is currently trading at a little over 7 Yuan to a dollar
The US government acted promptly later that day and China was labeled as a country that manipulates its currency.
Until last week, China had kept the Yuan below a psychological and symbolic number below the 7 to the dollar mark, a number which it had maintained for the 11 years. The central bank of China sets a desired rate of foreign exchange for its currency and accordingly monitors its rise and fall during the day.
Experts and analysts believe that China has caved in to the pressures created from the imposition of US tariffs during the year gone by which has pushed the Yuan further downwards. The economic slowdown that China is going through makes it harder for them to maintain its currency and if the experts are to be believed, Monday’s drop has now brought Yuan to a value which economists consider to the actual market value of the currency
The Chinese and USA experts have argued that although China manages its currency carefully through a lot of measures in order to keep its currency stable and does so by the purchase and sale of dollar bonds as well as by maintaining a control over the outflow of the currency, these activities cannot be deemed to give rise to manipulation of currency.
China as further argued that the exchange rate fluctuations can be attributed to market forces. The experts in China believe that further devaluing the currency will put China’s economy at risk and have suggested that it is unlikely that the company will push the currency any lower.