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A cheaper yuan would also boost exports.4.4
A cheaper yuan will help Chinese exports by making them less expensive on overseas markets.
But the fear is that China will "export" deflation because a cheaper yuan cuts the price of its imports in advanced economies.
Edwards, of the bank Société Générale, argues that as well as creating a challenge for China's Asian rivals, by making its exports more competitive, a cheaper yuan will send "a tidal wave of deflation" breaking over the world economy.
Chinese businesses compete with regional rivals to supply the world with everything from raw steel to fridges, and a cheaper yuan will make Chinese exports less expensive, potentially boosting the overseas sales that have been among the main drivers of growth during the nation's remarkable rise over the past three decades.
Forward contracts betting on a cheaper yuan are headed for a record monthly jump, while option premiums to sell the currency are at a six-month low.
Similar(49)
A cheap yuan has also favoured manufactured items, which can be sold abroad, over services, which often cannot be.
Rather than a cheap yuan leading to a flood of Chinese imports, the yuan has actually strengthened as the deficit has widened.
They argue that, just as a cheap yuan has recently distorted China's economy, and a cheap yen distorted Japan's in the early 1980s, so the rest of Asia is cursed by its addiction to export-led growth.
A cheap yuan has also favoured manufactured items, which can be sold abroad, over services, which often cannot be.In this section Brave new words Come together Mid-crisis life Cap and flayed How's my driving?
American officials, in particular, have been upset by the impact of a cheap yuan on America's trade balance with China, and by the impact of that imbalance on employment.
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