Ask Lemmy

China takes a lot of action to control its currency well above typical markets. This includes significant regulations on capital transfers outside of China.

The value of Chinese yuan is directly dictated by the Chinese government, in contrast to the other currencies you mentioned.

A stated raise in value would erode their national manufacturing competitiveness, which is a large percent of Chinese GDP, and hit most people in the country hard, instantly erasing a proportional amount of their savings value, which would threaten Chinese political stability.

1 usd to 6 yuan from 1 usd to 7 yuan means tge 1.5 billion chinese people holding rmb lose almost 10 percent of their purchasing power instantly and directly because of government action.

one of the upsides for the Chinese government is that Chinese people are very dependent on living in China, lending political stability and citizen retention.

This encouraged dependency is effective because it really is incredibly cheap aid convenient to live in china. USD equivalent of $1 meals, $100/month apartments, new 2026 EVs with the highest safety ratings in the world for only $8000, everything delivered to your door the same or the next day for free or nominal shipping costs, cashless society, national affordable healthcare, and many more.

Any declared raise in value of the yuan destabilizes the entire system and citizen dependency that the centralized government appears to be working very hard to establish and maintain.

It may be manipulated by the government. A low Yuan means their goods are more competative in foreign markets. It also means that Chinese travelors have to pay more, discouraging international travel. Both of these are positives in the government's eyes.

East Asian countries also have much lower denominated currencies in general. One USD gives you 158 Japanese Yen or 1505 South Korean Won. Even a Taiwan Dollar is much weaker at 31 = 1 USD.

Currencies are somewhat made up. What matters most is how they move against each other. Usually this is going to balance trade naturally. However it can be manipulated to increase exports for example.

EDIT, disclaimer: I'm writing this using USD as a primary example, but it holds true for many other currencies as well.

Because it's not as freely traded as the USD. The main reason behind USD being so stable is because it's available "anywhere". And the reason for this is because it was always freely traded and easily bought by "anyone". This results in loads of countries having USD as a foreigner reserve. On top of this, US monetary policy (not to be confused with US economic policy) values stability over anything else, resulting in a sought after currency for long term holdings, thus increasing its price.

The Yuan could in theory serve as a world reserve currency as well, but faces some challenges:

• Yuan has traditionally not been as freely available, so there's simply less of it going around.
• Chinese monetary prioritizes economic power over stability. Trumps whining about Chinese devaluing its currency isn't completely without merit.
• A strong Chinese economy is a rather recent phenomenon, so there's not a whole lot of stable history to point to as an argument for buying a huge amount of Yuan as forex reserve
• The currency is subject to whatever the CCP considers best for China, not the currency.

This results in Yuan not being as attractive as the USD. Combine this with it being in the interest of the CCP to keep the currency somewhat low (because that's in the best interest of their export capacity), and you get a Yuan trading for significantly less than its potential.

I honestly don't see this changing any time soon. Having the Yuan as the de facto world default currency is simply not a priority for neither China nor other countries. And the ones who control its value have a vested interest in keeping it low.

It is worth noting that a "cheap" currency that can be bought for 1000 jimjams on the dollar doesn't make it a low value currency. The exchange rate itself does not determine value, only the price. Value of a currency is derived from (percieved) future prospects of the currency. If it's more or less certain that you can buy 1000 jimjams for one dollar, gbp, or euro 50 years from now, that makes the jimjams a valuable currency, even if the relative exchange rate is high.

The CNY is pegged to a basket of currencies.

Currency manipulation.