How does currency undervaluation by many countries affect the world economy?

1) How does currency undervaluation by many countries affect the world economy?


2) What are the reasons for the US to pressure China to let its currency appreciate?


3)What are the reasons for China to resist the pressure to appreciate its currency?|||Barebones answers are:





1) Products bought and sold between countries are not where the market dictates them to be. This leads to tensions between countries who prefer to let their currencies rise/fall based on demand and countries who artificially keep their currency high or low. Other countries whose currency is rising feels economically disadvantaged because other countries are able to keep their export prices low due to their currency being kept undervalued. This could lead to either countries manipulating their currency as well or putting pressure on those countries who are doing it.





2)US wants China to let its yuan appreciate because by keeping the yuan undervalued against the dollar, US exports to China are becoming more and more expensive as dollar becomes more stronger against the yuan. The US sees that China needs to establish and promote domestic growth, and that means buying more imports. However, because China is keeping the dollar stronger against the yuan, many Chinese don't want to buy US goods because it is expensive. The US basically wants to be the first one in line when China experiences exponential growth in the purchases of imports.





3) China doesn't want its currency to appreciate because by keeping the yuan low, they are able to export their goods at a cheaper price. China competes with Brazil, Russia, and India among others for exporting goods, and by keeping the yuan artificially low, China is able to gain that advantage of being able to sell your goods at a cheaper price. Cheaper prices looks more attractive to buyers who then may have a favoritism to China because of that reason. More exports being bought from China means more economic growth. If the yuan rises, then this economic advantage lessens and other countries who are major exporters are then able to compete at a greater degree.