The Effects of China’s Yuan Devaluation

By Abbie Schepps

China has devalued its currency, the Yuan, three times in the past month. It was devalued by nearly 2 percent, followed by a 1.6 percent cut and a 1.1 percent cut. This may result in benefits to China such as export growth. It also places pressure on countries surrounding China, who may attempt to follow these currency cuts. In addition, it has the potential to greatly affect the U.S., as a strong dollar has the potential to become even stronger if the Federal Reserve decides to lift interest rates. The U.S. may experience further loss of international business opportunities to Chinese firms, because these firms can offer the same products for less money. It appears that China is sending a message of strength, but this devaluation may actually be a sign of China’s worsening economic condition and a real need to increase their exports.