Eli5 Why is the value of the Chinese Yuan small compared to other countries (excluding US) even though it has the second largest economy in the world?

Question

Eli5 Why is the value of the Chinese Yuan small compared to other countries (excluding US) even though it has the second largest economy in the world?

In: 29

Answer 1

Currency value is totally arbitrary. Someone could easily make the argument of why the value of the US penny is so small compared to other countries. What is significant is how exchange rates change with time.