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The current situation here is similar to the one that's happening in China, the Yuan is currently floating around the U.S dollar, parallel to how the Egyptian pound is floating right now, the Egyptian pound and Yuan rely heavily on the U.S Dollar which is a big factor when it comes to China and Egypt's economy

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The difference between China AND Egypt is that the devaluation of the was one of the key conditions by the International Fund in order for Egyptian to obtain the $12 billion. As a result, the Egyptian central bank floated the pound to aid stabilize the economy, which has been undermined by a shortage of dollars. Meanwhile, China was not forced to change its currency, rather, they did it by free-will. Afterwards, in Egypt, inflation, social and economic instability were an effect of the decision. So, when this happened, nothing was impacted because no one really cares about Egyptian pound. When this happened, nothing changed because thats whats been going on in Egypt and expected since 2011. However, China, is a huge global market and trader and will likely have a vastly change on the global economy. The move of devaluing the Yuan will have a huge effect on financial markets worldwide as China is the worlds biggest and largest trader and a lot of people depend on the Yuan, which is the contrast of the pound. China did this to make the Yuan more in line in the domestic market so its a fully studied move as a weaker current will help Chinas exporters sell their goods anywhere, globally. Unfortunately, it puts the countries who trade with China at risk and its an enormous disadvantage for them and will put pressure on other banks, markets, and businesses. Lastly, this cause will officially cause a global economic recession because China is a game-changer, one of the largest economies, biggest markets, and the biggest traders and exporters. Unlike Egypt obviously. Egypt isnt as big as China but hopefully one day will be so it can leave global impacts everywhere

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China's situation is very distinct than that of Egypts. Unlike Egypt, China is floating its currency to its advantage. China relies on Exporting products. Chinese products are everywhere. When looking at Egypt, no one wants their products. So pegging the Egyptian pound to cost more than it should really screwed everything up as it has no demand

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If China floats the Chinese yuan it will effect Chinese investors and business men trading with foreign countries. The country could live on its own, because it is the biggest exporter in the world. However it will make the currency worth less lowering the profit, which is good for other countries, but bad for China.

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the chinese economy depends on people importing their products because their yuan is weak so countries import a lot of products from china because of that. if the chinese decided to give in to western pressure to float their currency it will eventually rise and major importers of chinese products wont be importing as much. egypt on the other hand had their currency reach its real value when they floated (it decreased). if the chinese float the yen will increase and reach its real value while the LE will decrease and reach its real value.

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In China they export a lot and make money more than Egypt. The Chinese yuan is weak because countries import products from China. In 1994 the Chinese Yuan went up and to this day the Egyptian pound went up. For example when Egypt imports the money goes one way to USA and the EU. This causes the Egyptian pound to goes down. In China the currency goes up due to the exports. They money goes back to them because everyone's going to want the Chinese currency.

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China is a very a big industrial power, the biggest in the world. the demand for Chinese production is and always going to be very high. Countries want to have the Chinese products in their country. Egypt on the other hand does not have products that other countries would buy progressively, therefore, China would never have the same situation present in it.

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The devaluation of their currency wouldn't be as bad as Egypt because Egypt has a very low demand for Egyptian products and high demand for imported products, unlike china who have a high demand for Chinese products and low demand for imported products

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The situations are completely distinct, since Egypt exports way less than China. Many countries are reliant on China's exports; they're the top exporters of the world. If they decide to float their currency, the outcomes would not be as bad as Egypt's. Floatation of the yuan currency might have more benefits to China, compared to the Egyptian pound. The yuan's value will increase to it's real value, while on the other hand, the EG pound will decrease to it's true value

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Yes the situation in china is different because there are higher demands on chinese exports therefore its currency value wont be as low as  egypt. Egypt lacks the resources and services china  has to offer. Also, if the yuan increases in value, chinese production will be reduced and that will harm its economy which 25% of it  depends on manufacturing

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Egypt is not always in power of demand, since that we do not produce what the world wants, China on the other hand is always

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Just like Egypt if there wasn't any demand the prices wouldnt get floated by china if there wasnt any demand. For example the dollar if we didnt need it it wouldnt be floated, thats why the dollar will remain expensive. Low incomes and high demand work against eachother, and arent helping the floation get better.

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The chinese economy is stronger than egypt  so it wont be the same result because the chinese market is bigger than the egyptian market.

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Floatation depends on the demand, therefor since china keeps demanding the floatation will remain high. Much like Egypt we have a high demand therefor while floating the dollar will remain high. Although situations may seem the same they very different due to China being a major world exporter, they have a source of income.

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Transcript :
Since China have a large demand for their products and a low demand for imports so their currency's value won't drop as bad as Egypts situation . Egypt had pegged its currency to the dollar to help people importing but China had pegged its currency to the dollar in order to encourage exports. Now Egypts pound is worth its real value(less than what was prgged as) and if China floats its currency the value will go up to its true value making manufacturing and exports not as big as they used to be

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Regardless of whether China decides to float its currency or not, its power comes from exports to America. Its the complete opposite of Egypt's situation, since Egypt lacks the resources to be able to produce,and export products. China is floating their currency to make more profit because their currency's value doesnt match the amount it should so they feel that they are being taken advantage of. Egypt is floating to keep the economy stable.

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If China decided to float its currency there will be a lot of pros and cons. The pros would be helping the US exports and it promotes new types of investment in China, but the cons are that the Chinese exports are hurt also, the float softens China's demand for US treasuries. So, regardless if they decide to float the Yuan or not there will always be pros and cons. Yet, the dollar will remain high. Egypt is facing the same problem.

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Read the Article to answer the question on top of the page.

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Each year brings new mutterings that China is interested in methodically dismantling currency controls that keep the yuan pegged to the dollar with the eventual goal of making the yuan a (more) freely convertible currency.

It's a wonderful thought, but to be fair we're probably still a long way off from that ever happening. China initiated a currency peg to the U.S. dollar back in 1994, in an effort to secure their spot as the world's leading exporter. With a weak yuan, China's exports have remained competitive on a global level ever since and developed countries like the U.S. have exported hundreds of thousands (perhaps millions) of low-skilled manufacturing jobs there as a result.

What's lost in domestic manufacturing for developed countries, like the U.S., is gained in cheaper imports of goods and the cheaper manufacture of higher-end goods (since some parts are sourced and built in Chinese plants then brought back to the U.S. for final assembly). It's not a perfect model, and politically it's a sticky issue (since jobs are lost), but all things considered there's a net economic benefit - the U.S. (and global) consumer gets lower prices and the Chinese economy has seen blistering growth over the last 30 years. Taken together, this has provided an overall boost to the global economy and lifted a lot of other ships with it like Emerging Markets economies and stock prices.

Some of you might be thinking, sure, but isn't this still just plain and simple unfair trade? China manipulated its currency to keep its goods hyper-cheap relative to the world and essentially created a monopoly on manufacturing in the process. A lot of people here are out of work as a result.

This is true, and it's why the U.S. has put political pressure on China over the last decade to allow its currency to appreciate - something I believe China should absolutely do. But at this stage, we have to also be very careful about "biting the hand that feeds us," so to speak. A rapid appreciation of the yuan could mean goods made in China become more expensive, a cost that will likely get passed to consumers (you). Additionally, a stronger yuan would mean a slowdown of Chinese manufacturing, which makes up over 25% of its economy. If China weakens substantially, the global economy will feel it and it could hurt global growth and stock prices.

If it sounds like a Catch-22, it's because it is. But it's only a Catch-22 if the yuan rapidly and sharply appreciates against the dollar. What I would rather see is a gradual move toward greater flexibility, much like China started back in 2010. By some estimates, the yuan could be undervalued by 25%, so moving the trading band by a few percentages each year could be a smart solution to leveling the playing field, and to making removal of the peg easier when that day finally comes.

Currency hardliners would like to think that the solution is as simple as, "let the currency float and the free market will handle the rest." But it's not that simple - considering these pros and cons below will underscore why.
Pros to Letting the Yuan Float

Cons to a Rapidly Appreciating Yuan

Helps U.S. Exports - and European exports, for that matter. If the playing field is leveled and all of a sudden China may not be the best solution for cheap goods and production, the attractiveness of U.S. and European goods inherently rises. That could even lead to some manufacturing jobs returning to the U.S.

Promotes New Types of Investment in China - if China and multinationals lose their "subsidy" for expanding the manufacturing sector, it could free up capital for investment in other areas like expanding the service economy and promoting domestic consumption.

Empowers the Chinese Consumer - speaking of domestic consumption, the middle class in China is one of the fastest growing demographics in the world. If their currency goes a longer way towards purchasing goods in the global economy, everybody wins.

Creates New Wealth for Emerging Industrial Countries - if the cost of manufacturing in China rises with a rising yuan it could open new doors for other industrial nations with cheap labor, like Mexico and Vietnam. If there's one thing you can be fairly certain of, it's that multinationals will find a place with cheaper cost of production and move there. Doing so could help an emerging economy really gain steam and create new wealth.

Chinese Exports Hurt - If the manufacturing boom slows or even contracts, it could affect China's overall growth rate. As the second largest economy in the world, China is a hugely meaningful component to global GDP. Softening global GDP could threaten stock prices.

Softens China's Demand for U.S. Treasuries - China sells yuan and buys dollars to control the currency, but they recycle those dollars to buy U.S. Treasuries. Doing so helps the US finance our budget deficits. If the yuan floats, Chinese demand could sap.

Higher Production Costs for Some U.S. Multinationals - as production costs rise, those could get passed along to the consumer. Over time, those multinationals will likely seek cheaper production and move operations (a positive), but in the short term it could affect prices.

The Bottom Line for Investors

Having the yuan float is a tricky issue - both economically and politically - and I'm not sure there's a perfect solution. Regardless, the bottom line is that any change will happen only gradually, which should give the market plenty of time to digest the economic effect one way or the other. If the announcement comes that China is ready to move the trading band for the currency again, or even ready to let it float, I think there will be some clear winners and losers to emerge and investment implications would likely apply. Until then, it's a wait-and-see.

Regardless of whether China decides to float its currency (or not), its power comes from exports to America. But, what is the outlook for U.S. markets and our domestic demand? What are Zacks' predictions concerning Exports, Imports and Net Exports?

You are invited to find out by immediately downloading our newly released May, 2015 Market Outlook.

It includes the first forecast prepared entirely with our new macroeconomic model, MA/US 2015 and contains some surprising twists. There are opportunities, but also some ringing alarm bells regarding growth, the upside of the S&P 500, and, yes, China. I strongly encourage you to read it.

Free Download: Zacks' May, 2015 Market Outlook

All the Best, and Better Returns!

Mitch

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What Would Happen if China Decided to Float its Currency?

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Each year brings new mutterings that China is interested in methodically dismantling currency controls that keep the yuan pegged to the dollar with the eventual goal of making the yuan a (more) freely convertible currency. It's a wonderful thought, but to be fair we're probably still a long way off from that ever happening.