1. Use any source available to research and discuss the process of currency manipulation and how China supports the yuan.

In order to maintain a certain value of the yuan the Chinese government would have to intervene in the foreign exchange market. Because of their highly successful export trade, the Chinese have accumulated large reserves of dollars. They then use this export revenue to buy dollars. The increased demand for dollars increases the price of dollars on the exchange market. The other side of that coin is the fact that a dollar will now buy more yuan effectively reducing the price of Chinese export goods.

2. Visit http://www.iht.com/articles/2005/10/10/business/trade.php and discuss why some do not favor legislation that punishes China for currency manipulation.

This article identifies the issue of further economic access to china by American firms. Basically, if penalties are imposed on China for currency manipulations, China could retaliate and make it tougher for American firms to do business in China.

Multiple Choice/True False Questions