By the end of 2005, the Rupee (INR) could trade for as little as Rs 35 per U.S. Dollar.
The G7 nations make it sound as though an undervalued Yuan is the only cause for all the woes of their economies. But, as we read on, we see that though it may not be the only cause all their woes, it definitely is a big one.
China has been riding the big waves of growth at an envious 9 per cent plus rate of growth in the last two decades. It is all set to become an economic superpower in the years to come.
The world markets are flooded with China manufactured products, boosting the manufacturing industry in China, hence exports. One reason for this growth in exports has also been the pegged currency of China. China pegged its currency to the dollar in 1994, at 8.24 yuans per dollar.
Analysts claim that now the yuan is as much as 40 per cent undervalued. While the dollar continues to weaken, the Chinese exporters are taking advantage of the peg and growing by leaps and bounds.
On the other hand, the other G7 countries are facing the brunt of the depreciating dollar, making their exports expensive. Adding to the misery is the realisation that poorer countries like China and India are financing their ever-increasing current account deficits.
Stephanie adds: China has actually bought up most of the US debt. In theory, if China pays off enough of it, it can literally control the whole US economy by charging ridiculous interest rates on loans we have been given. In order to slow this from happening, Chinese currency is undervalued. The US is in danger of losing its status of a “first world nation” while we continue to spend $ in order to drop bombs on Iraq, racking upi even more of a debt. Canada is beginning to sound better & better I tell you.