Trade War with China

Economics, Premium POM

Understanding the RMB and Transforming the Existing Exchange Arrangement

China needs to increase foreign RMB demand so it can begin to phase out the accumulation of US dollars and maintain stability in its own domestic economy.

China is trapped because its economic model is based on exporting cheap goods and receiving US dollars in return. Chinese business owners exchange these dollars for RMB through the People’s Bank of China. This forces China to expand the RMB market which keeps the valuation down because RMB demand predominantly exists within China. This is what China is attempting to change as it internationalizes the RMB and creates asset markets based on the RMB.

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