Current Economic Issues
Chinese Currency Manipulation:
An advocacy for the Currency Reform for Fair Trade Act
The United States exported $91.9billion to China in 2010 which was a 32.1% change from 2009’s export figure of $69.6billion (U.S. Department of Commerce). Good news right? As the United States broadens their trade horizons with China they are able to raise capital in order to begin feeding their current account monster, whose appetite seems incorrigible. (The current account is the economic term given to a country’s trade balance, or export revenue minus import expenses.) As the debt clock continues to tick onward, $14,339,247,998,556 at 6:07pm April 30, 2011 to be exact, $91.9billion just is not going to cut it. However, many experts believe that $91.9billion could actually be as much as 40% higher! That 40% loss in export revenue can be directly related to actions taken by the Chinese Government which artificially pegs their country’s currency low compared to the U.S. Dollar. H.R. 2378, or the Currency Reform for Fair Trade Act, takes aim at the currency manipulation problem. The Currency Reform for Fair Trade Act will force the Yuan to a market value and increase the value of U.S. exports which will aid our massive trade imbalance and unemployment levels.
If you Manipulate it, they will Come
In order to support H.R. 2378, one must understand the problem currency manipulation poses. Currency manipulation can be defined as government involvement in the under or over valuation of a country’s currency through various activities in the open market. In China’s case, they put their trade surplus to work in order to do just that.
By buying substantial amounts of United States debt on the open market, China is selling their own currency thus lowering the demand and exchange rate value against the dollar. The Peterson Institute for International Economics estimates that the Yuan is undervalued between 20% and 40%. That... [continues]
Cite This Essay
(2011, 05). Chinese Currency Manipulation. StudyMode.com. Retrieved 05, 2011, from http://www.studymode.com/essays/Chinese-Currency-Manipulation-692919.html
"Chinese Currency Manipulation" StudyMode.com. 05 2011. 05 2011 <http://www.studymode.com/essays/Chinese-Currency-Manipulation-692919.html>.
"Chinese Currency Manipulation." StudyMode.com. 05, 2011. Accessed 05, 2011. http://www.studymode.com/essays/Chinese-Currency-Manipulation-692919.html.