The Chinese Yuan and its importance in the global economy.

Do Yuan to Buy Some Renminbi?
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The Chinese Yuan and its importance in the global economy.
The Chinese Yuan has become significant in the global economy due to factors such as improved regulations by the Chinese government and also the inclusion of the Yuan as a reserve currency by the International Monetary Fund. This inclusion has led to the integration of the Chinese economy into the global financial system (Prasad, 2017). The internationalization of the Yuan has led to the reduction of transaction expenses of international trade, decreased exchange rate issues, and the elevation of the number of financial transactions in Yuan through increased global use of the currency, especially with China’s major trading partners.
China has already signed currency swap agreements with over thirty countries in the promotion of the global use of the Yuan and also boosting the use of this currency as a global reserve currency (Enright, 2016). China’s Belt and Road Initiative that connects Asian, European, and African continents has become an essential platform for promoting its currency globally through modernizing trading routes with infrastructure development along the Belt and Road. This has led to the enhancement of international cooperation across the world and the development of cross-border transactions.
Discuss China’s exchange rate and its impact on the country’s foreign direct investment
Foreign direct investment highlights the capital invested within a state that provides manufacturing and service capabilities for domestic consumers and international markets. China maintains a fixed exchange rate on its currency through controlling the Yuan, which allows it to keep its exchange rate low (Enright, 2016). This country does not have a floating exchange rate, which is determined by the market, as is the case with many advanced economies. Instead, China pegs its currency to the U.S dollar.
When China maintains the Yuan at a fixed exchange rate, it effectively controls the prices of its exports. This is accomplished to ensure that its products are cheap when being sold in the U.S (Prasad, 2017). China achieves this feat only due to its robust economy that allows it to manage numerous corporations and the central bank. The Yuan has enabled the Chinese government to foster the competitiveness of its exports when sold in international markets. Once these earnings are translated back to the parent country, China and the businesses taking part in the transaction gain massive profits due to the fixed exchange rate of the Yuan.
Therefore keeping the exchange rate low ensures that the commodities of china remain competitive within the global market and profitability at home for most corporations. This strategy has also made Chinese exports cheaper and, therefore, more attractive in compar...