Asia, and especially China, has become an increasingly valuable cog in organizations like the International Monetary Fund and numerous global markets. Financial institutions and traders recognize that China’s financial and political health are integral for global economy.

The yuan, China’s currency, has increased against the dollar reaching a record high. Many financial experts believe this could have serious impact on both Chinese and global economy.

In an interview with AdvisorOne earlier this year, Benjamin Wey of New York Global Group discussed this very issue. He explained:

“There is a $30 billion a month in foreign currency sent to China through trade… That $30 billion could add to the liquidity of the Chinese economy by appreciating it further and making imports more expensive. That action will cause importers to buy more by paying in foreign currency, and that causes Chinese foreign product exports to drop due to their greater cost.”

Benjamin Wey added that the raised RRR and interest rates significantly impact China’s inflation.

“It’s a very effective measure,” he said. “The central bank of China taking away the excessive liquidity of banks is part of collective efforts to beef up the local economy and contain inflation. That’s its number one objective.

“Its secondary objective is to maintain a balance between unemployment and inflation. It’s a balancing act all the time, because the more inflation, the more pay people get. By not having inflation, there’s too much constraint on the economy. Tightening policy, as they’re doing now, could reduce exports and kill jobs.”