Exposition based on RMB Appreciation (Chinese Yuan)
The continuing appreciation of RMB which is to a large extent derived from China’s growing trade surplus and the pressure of other countries has attracted worldwide attention. With China's economy booming, RMB has risen by 35% since 2005 and China’s currency reached an all-time high against the dollar in 2013, gaining 3% to hit 6.05 yuan per dollar (Fortune China, 2014). This phenomenon has given rise to a series of negative influences on Chinese economic development and social stability. Solutions must be found soon. Of the numerous solutions proposed, the most viable approach would be for the government to boost domestic demand. National tax subsidy which is known as tax expenditure, combined with encouraging public and private investment would make an indelible contribution to economic and social sustainability for China.
Reducing China’s economic dependence on outside and expanding domestic demand would be directed to the reduction of the adverse effects on export enterprises (Luo et al., 2014). Tax expenditures would provide financial support for those export companies to develop high-tech and high-value products and gradually alter the original low labor cost access to international market. Only in this way, not only could the Chinese export enterprises avoid frequent anti-dumping investigations or safeguard measures from foreign countries to put pressure on RMB appreciation (Luo et al., 2014), but also the Chinese authorities could readjust and optimize industrial structure, product structure and the structure of import and export merchandise. In addition, the program of tax expenditure would be conducive to attracting foreign investment, introducing advanced technology and creating jobs. Although the tax expenditures may reduce the government's current tax revenue, this "loss" could be exchanged for foreign capital, advanced technology and management experience. So that the Chinese authorities...
References: Fortune China (2014). 3 minutes to teach you to understand RMB appreciation.
Retrieved 27 Dec, 2014 from
Han, B. (2005). The Ways of Dealing with Non-Performing Loans in China: Challenges and Problems, The Journal of the study of modern society and culture, 34, 211-239
Luo, S. X. et al. (2014). Analysis of the Causes and the Consequences of Consecutive RMB Appreciation. Journal of Financial Risk Management, 3, 1-8.
National Bureau of Statistics of China. (2013). 2-18 Gross Domestic Product by Expenditure Approach. Retrived 27 Dec, 2014 from
Tung, C.Y. (2007). The Renminbi Exchange Rate in the Increasingly Open Economy of China: A Long-Term Strategy and a Short-Term Solution. Issues & Studies, 43(1), 79-114.
Please join StudyMode to read the full document