In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy US dollars and increase the supply of yuan.

Question

Quizplus · Accepted Answer

In order to maintain an undervalued yuan, the Chinese government must increase the supply of yuan by buying US dollars, which increases demand for US dollars and puts downward pressure on the yuan's exchange rate. This helps to encourage a trade surplus by making Chinese exports cheaper and more competitive in international markets.

In Order to Maintain an Undervalued Yuan to Encourage a Trade