Why Chinese Yuan is undervalued, is that going to be a severe worldwide issue? Yang Li Abstract Currency Valuation issue is one of the prominent issues among the worldwide countries struggling to restore their own interests. As we all aware that, China is developing really rapidly recently years and is becoming more and more important in the worldwide business filed, the Chinese currency issue starts coming into people’s view. Almost every aspect of China and chines economy has been widely discussed over last few years. Great economic growth and potential of this country lead many of the economists and political scientists to create theories and works about the impact of Chinese economy on the world, and about China’s possible future development in international relations. The currency of China is called the Chinese Yuan or the RENMINBI, which translates to “the people’s currency”. The People’s Bank of China, the monetary authority of the People’s Republic of China, issues the RENMINBI. In this research project, we examined the Chinese currency and to see whether it is been undervalue or not. China follows a fixed exchange rate policy where the central authorities keep Yuan pegged at a specific rate. Since 2005, over last decade, Chines Yuan is as reliable as the big ben. If Yuan is kept undervalued, it signifies that one unit of foreign currency (forex) can buy more Yuan than it could under flexible exchange rate system. Equivalently, one unit of Yuan can buy less Forex than it could under flexible exchange rate system. This undervalued Yuan results in an increase in Chinese exports, since Chinese goods are artificially made cheaper than goods in other countries, who import the “cheaper” Chinese goods in higher quantity. Chinese exports increase, resulting in a higher trade surplus (or lower trade deficit). For rest of the world, an…