Explain Why and How China Has Kept Its Chinese Renminbi

question 22

Essay

Explain why and how China has kept its Chinese renminbi undervalued? What would be the potential problem for this policy?

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Definitions:

Temporal Method

A method for currency translation that uses exchange rates based on the time assets and liabilities were acquired or incurred.

Lower of Cost

An accounting principle where the inventory is recorded at the lower of its historical cost or market value.

Net Realizable Value

The estimated selling price of goods minus the cost of their sale or disposal, reflecting the net cash expected to be generated.

Highly Inflationary Economy

An economic condition characterized by a cumulative inflation rate over three years approaching or exceeding 100%, significantly impacting financial reporting.