In the U.S. current account, most of the trade deficit results from an excess of imported…
* It would cause a scarcity of currency, leading to rapid deflation, and also, overproduction of goods means major markets would plummet in value, outbalancing demand, leading to major losses for the producers.…
1. In the U.S. current account, most of the trade deficit results from an excess of imported…
2. Why does the Chinese government want to keep its currency at an artificially low level against the US Dollar? What is the risk for China? For the US?…
Even for countries for which trade with China is a small blip on their gross national products (GDPs), the domino effect of falling demand will hit individual companies that have direct or indirect exposure to China. Some companies that sell products in China, such as Apple and Microsoft, are more directly exposed.…
3. Will more Chinese companies make investments in the United States as opposed to China and the future? Fully explain and justify your choice. I believe that there will be an increase in Chinese companies making investments in the United States. For starters, it will help the companies’ international business relationship. To add, there are several stimulus packages the companies would qualify for (such as the economic tax credit) by doing business in America. Also, their profit would increase. The U.S. dollar is more than Yens. So, they would be making twice as much money in the U.S. on the same product sold in China at a cheaper rate. And, the cost to ship would decrease, because the companies would not have to pay duties on products being shipped within the United States. Therefore, it is beneficial for Chinese companies’ to invest in the…
This would help the Chinese dollar in the financial service and trade outlook aspect. There has been concerns from Americans in this switch, but the newspaper is taking the stance that we should not be afraid of it happening because it is an important reform step that we should encourage china to be making.…
China, the largest growing market in the world, currently has a policy regarding monetary regulation that allows the Yuan to “float”. This has seen the Yuan appreciate by approximately 24% over the past few years. Today, the exchange rate between the Chinese Yuan and the American Dollar is approximately 6.3 Yuan to 1 Dollar. Some argue that China should revalue the Yuan again the dollar, establishing a more fixed exchange rate. Others believe that current should allow the Yuan to float, as it constitutes the idea of a free market.…
These data shows to what extent U.S economy is dependent on Chinese economy. United States is heavily dependent on Chinese economy for many its important requirements and as a result Chinese are holding huge amount of dollars as reserves. This is likely to put upward pressure on the value of Chinese currency and therefore Chinese currency would appreciate. The appreciation of Chinese currency might result in China losing its competitive advantage on global stage and therefore can negatively affect Chinese trade balance with other countries.…
For the last twenty eight years, China has been quickly growing into one of the largest economies in the world. China has accomplished this feat, in part, by radically changing their policies on trade and free market interactions with other countries. During this process, China has bought approximately one hundred trillion dollars of United States debt in the form of Treasury bills, notes, bonds, and Inflation Protected Securities (Amadeo). This debt has given China leverage against the United States which has enabled China to keep the value of the United States dollar high, while keeping the value of the Chinese yuan low. As the inflation of the dollar continues to negatively affect the United States economy, China has become an economic superpower. Recently, concern has risen that China is a threat to the economy of the United States. China has become a perceived threat to the United States economy because of the increasing trade deficit between the two countries, the ability to undercut production costs of similar products produced in the United States, and the amount of leverage that China has over the United States due to the amount of money that has been lent by the Communist nation.…
However if this exchange rate policy changes to a floating policy and the Yuan appreciates, the result will be increase in imports, as local products will be perceived as comparatively expensive, and a decrease of exports. As an overall effect surplus will start to decrease and may even become deficit depending on how drastic the appreciation will be, a stronger Yuan would also reduce economic growth and increase unemployment. Another effect will be withdrawal of FDI which was a result lower exchange rates and low volatility, all of this FDI will try to flow to…
Bradsher, Keith, China will allow its Currency to Fluctuate More, May, 19, 2007, New York Time, Retrieved, September 24, 2008, From http://www.nytimes.com/2007/05/19/business/worldbusiness/19yuan-web.html?_r=1&oref=slogin…
The U.S. has become the biggest economy and played leadership role of the world after the World War II. After the U.S. established the position of the global financial center, the world has entered the period of the Market Economy. The Market Economy is a kind of economic system, in which the companies and enterprises make their developing strategies in order to achieve the maximization on both personal and social profits. Many countries adapt the Market Economy, so that they promote their domestic economy on the financial freeway. China also has studied the cases from the countries running the Market Economy and established the Market Economy as its financial system in 1978. After the development over three decades, China has become the second biggest economy and the biggest consuming market of the world. Especially after 2001, China’s entry into World Trade Organization (WTO) makes the connections between the two biggest economies into a much deeper extent. There are many important effects brought by China to the U.S. economy. Therefore, when the question is related if the Chinese economy brings more positive effects than negative effects to the U.S. economy, people’s attitudes are divided. Some opponents argue that China brings more negative effects to the U.S. economy, since China gives trade deficits, raises the risks of import safety, and competes job opportunities to the U.S.. However, these arguments are not completely true, because China also contributes many positive effects to the U.S. economy. Although the opposing arguments focus on the negative effects brought by the Chinese economy, the Chinese economy may bring more positive effects than the negative effects to the U.S. economy because the Chinese economy could strengthen economic safety, offer natural resources,…
5 The exchange rates lower than before between America and China. It is good news for oversea students and their families. Because all of Chinese students who study in US, they can pay low tuitions fees than used.…
A currency that is overvalued, and which makes American produced products expensive in the world market compared to goods produced in developing countries such as China. On the other hand, imports are cheaper something that continues to keep many Americans out of jobs as more companies relocate production to places like China (EPI, 2013). The communist government in China has consistently undervalued the Yuan to promote itself as the low cost production destination of the world. That is something the American government has steered clear of doing to protect its economy.…