• o_d [he/him]@lemmygrad.mlEnglish
    8·
    10 months ago

    China purposely devalues the CNY against the USD. I believe that they do this because it’s beneficial for international trade. China’s investment in these areas is in CNY and therefore, just converting it to its value in USD doesn’t give a true comparison of the value of investment. PPP takes a collection of various commodities in both countries and compares their domestic prices with each other. This gives us the PPP adjusted value of investments in USD. Hopefully I got that right.

    • Sinistar [he/him]@hexbear.netEnglish
      3·
      10 months ago

      I believe that they do this because it’s beneficial for international trade.

      Having a weak currency facilitates other countries buying your products, so it’s useful for an export economy - but it prevents you from importing as easily. The opposite is true for having a strong currency, and this dynamic drives a lot of things like de-industrialization in strong currency countries and unequal exchange extracting wealth from weak currency ones.