Investment (Essay Sample)

EVALUATION OF THE TRUE EXCHANGE RATE FOR THE CURRENCY PAIR USD/CNY
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Evaluation of the True Exchange Rate for the Currency Pair USD/CNY
The value of a country's currency is pegged on several factors and bears significant influence on the county's global economic perceived power. Among the factors are some that the federal government can leverage o enhance the value and strengthen the role of the currency in the financial markets, international trades, and financial regulator reserves. For a country's currency to experience improved autonomy and more significant influence, it needs to play a more prominent role in international transactions. For decades the currency of China has grown at a much faster rate than the United States. The United States currency and the Chinese yuan have recently demonstrated a series of clumsy moves by the respective national government s to gain the upper hand of currency valuation over the other. The currency pair has experienced continuous gyrations caused mainly by what I perceived by the USA as China's contrariness regarding its currency's appreciation.
Currently, the currency pair exchanges at USD/CNY 6.495. this rate is concurrent with the current economic condition of a gradually expanding economy in China. For instance, according to a CNN report (2021), China's economy shows signs of recovery from the damage caused by the COVID-19 global pandemic. In the first two months of 2021, its economy has surged, leading to a growth rate of at least 30 percent for each key performance indicator (He, 2021). China's industrial growth is reported to be at 35.1 percent and beats the expectations of economic scholars by 9 percent. Also, retail sales outperformed speculations and reported an increase of 33.8 percent (He, 2021). Even with target restrictions, the government institutes intervening measures to target more gradual growth of at least 6 percent by the end of 2021 compared to the previous year (He, 2021).
Note. Figure 1 illustrates the GDP performance for China and the USA over the past 60 years.
On the other hand, the United States economy has only just begun to show marginal signs of recovery from the damage caused in 2020 by the global pandemic. Retail sales declined by 8.7 percent, and the rate of unemployment skyrocketed to over 3 million new recorded unemployed individuals (Egan, 2021). Still, t