Friday, 12 October 2018 12:05

Yuan Devaluation

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The United States of America feels inconvenient to see the value of Yuan fall. US Treasury Secretary, Steven Munchin in Nusa Dua, Bali on Wednesday (10 October 2018) warned China not to devaluate its Yuan. The US wants this monetary move is discussed in the US-China trade agenda. In fact, that China devaluated its Yuan is not done for the first time when  the US has imposed tariffs on Chinese products. Several years earlier, China also devalued its  Yuan against the US dollar. In August 2015, this action was carried out by China in a bid to boost the performance of Chinese exports which experienced a decline. A weaker Yuan makes the competitive edge of products made in China be able to compete in the global market. When this was carried out, Trump has not been in power in the US and has not yet begun trade war between US and China. As a result, Yuan's devaluation at that time made the flow of funds worth US$8 trillion dollars withdrawn from stock exchanges throughout world. Last April, US President Donald Trump accused Russia and China devalued their currencies, when the US raised interest rates. Since in January 2017,  Trump has served as US president, the US dollar value actually has dropped against Yuan, reaching more than 8%. Why does the United States object to the devaluation of the Yuan, Ruble or other foreign currencies? The answer is if the value of the foreign currencies is low, the products are more competitive. High interest rates in the US make the dollar value rise and make US products more expensive. In addition, if Yuan is evaluated, the application of high tariffs carried out by President Trump towards Chinese products will be in vain. This is due to the high price of Chinese products because of the US tariff, it drops as the value of low Yuan makes the tariffs decrease. In addition to the Yuan or Ruble whose value may be deliberately lowered, Indonesia does not reduce the value of its money. But, Indonesia‚Äôs need for dollars is high because of the debt payment needs and imported product. Consequently, this causes the US dollar value has risen significantly so far. Actually, this makes the value of Indonesian products is more competitive. The question is that whether we will take the opportunity to devaluate rupiah to boost revenue though there is an economic slowdown due to the US-China trade war.

Read 430 times Last modified on Saturday, 13 October 2018 10:40