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Why would China want its own currency to be undervalued relative to the U.S. dollar? How does China maintain an undervalued currency?

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First of all, please note that it is not necessarily true that China’s currency is undervalued relative to the American dollar.  There is no foolproof way to determine what the “proper” value of a currency is.  Many Americans believe that the yuan is undervalued; others, as in this link, do not believe this is true.

If we assume that the yuan is undervalued, China would want it that way because a weak currency is good for exporters.  When China exports goods to the United States, American buyers...

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