Word: dollarized
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Dates: during 2000-2009
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...Although considerably more muted than expected, the answer came on July 21, when the People's Bank of China posted a notice on its website announcing the end of the yuan's peg to the dollar. Citing its wish to "improve the socialist market economic system in China," the bank set the yuan at 8.11 to the dollar?a 2.1% increase in its value?and decreed that henceforth it would trade within a narrow band of 0.3% each day against a basket of (unnamed) currencies. Now that the yuan is allowed to float, even only slightly, its value should better...
...Indeed, financial markets greeted the change without a fuss. But much like the famous butterfly of chaos theory, which flaps its wings in Brazil and sets off a tornado in Texas, Beijing's decision portends momentous consequences for the global economy down the road. Scrapping the dollar peg is widely seen by economists as the first step toward a free-floating, and much stronger, yuan. If the yuan continues to appreciate, China's new currency policy could reorder global trade and investment, boost the power of Asian consumers, and address global trade imbalances. U.S. Treasury Secretary John Snow...
...from Bangkok to Tokyo to Washington, where U.S. Federal Reserve Chairman Alan Greenspan called it "a good first step." It's unclear whether Beijing acted because of American pressure or in spite of it. Zhou Xiaochuan, head of China's central bank, said the shift was made because the dollar had become too volatile, so it was in China's own long-term interest to change. Whatever the reasons, the decision is expected to smooth strained relations between China and the U.S.?good timing, given that a meeting in Washington between Chinese President Hu Jintao and U.S. President George...
...short run, at least, China's revaluation of the yuan should give the rest of Asia a little breathing space. In order for their industries to remain competitive with China's, central bankers throughout the region have been trying to keep their currencies from appreciating against the dollar?an increasingly difficult challenge as their economies strengthened. Yuan reform could remove the first log from the logjam?the Japanese yen, Korean won and Thai baht all rose against the greenback immediately after China revalued. And within an hour of Beijing's announcement, Malaysia ended its 7-year...
...Economists predict that the Chinese government will gradually allow the yuan to appreciate?Deutsche Bank expects a 10% gain against the U.S. dollar over the next two years. And as the Chinese currency strengthens, the economic consequences become harder to foresee and control. Hot money could pour into China from speculators looking to profit from additional yuan gains, undoing Beijing's efforts to curtail excessive spending and lending in overheating sectors of the economy such as real estate. Also, if the yuan goes up by 10%, "you start to worry about China's competitiveness," says William Fung, managing director...