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Essay / Research Paper Abstract
This 7 page paper looks at three questions set by the student. The first examines the exchange rate system between 1980 and 1994, including the dual exchange rate system, considering how it impacted on China, Asian neighbours, the US and the EU. The second part of the paper looks at the way foreign direct investment (FDI) has developed in China, the level and the benefits it has brought. The last part of the paper discusses the development of bond and equity markets in Asia, looking at why they are beneficial and the ways in which they clash with traditional economic policies. The bibliography cites 4 sources.
Page Count:
7 pages (~225 words per page)
File: TS14_TEchinaecon.rtf
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Unformatted sample text from the term paper:
the economy. Between 1988 and 1993 there was a dual exchange rate system., The RMB could only be used domestically, importers and exporters had to use currency certificates, where exchange
rates were not fixed, but determined by the market with trade taking place through swap centres. The swap centres were established as a way of centralising the fragmented foreign exchange
system that had emerged since the beginning of the 1980s (Wang, 2004). This allowed for a market rate to be used with international trade and facilitated the opening up
of the markets, while it also created some difficulties, during the early 1990s there was a high level of depreciation (Wang, 2004). This caused difficulty as the swap centres accounted
for about 80% of the current account foreign exchange transactions (Wang, 2004). The regime had advantages and disadvantages. Fixed exchange rates can help create stability, but for china with
the RMB generally seen as over valued and there were also costs, and reflected in the devaluation seen over this period, it meant that the country was not very competitive
in comparison to neighbours whose currencies were freer floating. It may be argued that if the country had been more competitive then growth may have taken place too fast, with
an inability of the government to control growth. However with the controls on the exchanges growth took place but it was constrained, which did have high opportunity costs, but also
allowed for the country to develop strong commercial and industrial foundations for entrance and participation in the international markets. It is worth noting that when the system of exchange
rates changed in 1994 and there was a further depreciation, when China pegged the value against the dollar there was a massive exponential increase in Chinese exports (Morrison and Labonte,
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