“They keep devaluing their currency until they get it right. They’re doing a big cut in the yuan, and that’s going to be devastating for us [the United States].” – Donald Trump, 11 August 2015.
“I think they’re grand champions at manipulation of currency. So I haven’t held back. We’ll see what happens.” – Donald Trump, 23 February 2017
a) What economic basis is there for Mr Trump’s statements?
b) Assume that the equilibrium market exchange rate is US$0.30/¥ but the current rate is $0.15/¥. Show this on a supply and demand graph for yuan. What must China’s central bank do to maintain the rate at $0.15/¥?