Recent studies related to the Yuan can be summarized to the effect of appreciation. In this paper, the effects of Yuan appreciation on chinese economy are analyzed. Also the policies of chinese government are critically reviewed and prospected. Related to the effect of Yuan appreciation, this paper looks over preceding researches to try empirical analysis based on arguing whether the appreciation lead the economy to expansion or contraction. In China, the VECM empirical test show that the Yuan appreciation lead the contractionary revaluation, not have expansionary effects. It seems that the Chinese government does not prefer to have a drastic appreciation of Yuan in such a uncertain status of the world economy. The reason for this sort of move is the contractionary revaluation effect which is caused by the appreciation of Yuan.