Publications
Publications
- November 2019
- HBS Case Collection
Floating the Exchange Rate: In Pursuit of the Chinese Dream
By: Laura Alfaro and Sarah Jeong
Abstract
In the decades following 2005, China faced significant financial challenges. Inflation spiraled upwards and China’s economy stagnated in the wake of the Global Financial Crisis. The country’s leaders took an interventionist approach to weather the storm, controlling capital and exchange rates. These actions raised criticism from other nations, and in 2017 the U.S. initiated the U.S.-China Trade Wars, which enforced tariffs and requirements for increased transparency. As implications of the trade wars remained uncertain, many wondered whether the central bank would introduce further discreet steps to change the yuan. Would China’s currency appreciate as substantially against the U.S. dollar as predicted by economists? And when would further change occur? The stakes were high; a freer yuan float would impact groups within and outside of China very differently. Would China’s currency then be allowed to depreciate or appreciate if fundamentals required it?
Keywords
Exchange Rate; Inflation; Debt; Currency Exchange Rate; Inflation and Deflation; Borrowing and Debt; China
Citation
Alfaro, Laura, and Sarah Jeong. "Floating the Exchange Rate: In Pursuit of the Chinese Dream." Harvard Business School Case 320-039, November 2019.