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…
3. What would be the consequences of a 20% revaluation (increase in the value of the Renminbi) for China, western countries, Japan, and developing countries? How would it impact workers, exporters, and importers in China?…
Recently, under the pressure of other countries especially the U.S., China changed its exchange rate by 2.1 percent in July 2005 and has been resisting making big changes in its exchange rates system. This policy change not only indicates that China will no longer peg the dollar at the historically fixed rate with the U.S. dollar but would adjust gradually its currency to a basket of other currencies.…
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…
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.…
If the Yuan was revalued to be exchanged at a higher exchange rate again the, then the United State’s balance of payments would decrease proportionally. Alternatively, the balance of China’s payments would increase. Countries that have their currency tied with the United States, such as Mexico, would likely have their competitiveness improve while countries tied to China, such as Thailand, would have their competitiveness diminish. Wal-Mart, a major American corporation, would have harder time paying for their overseas imports. Likewise, American retail consumers would not be able to purchase as much due to higher prices relative to the Yuan. Chinese retail consumers, on the other hand, would be able to purchase more goods.…
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.…
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…
China has pegged its currency against the U.S. dollar. If demand for dollars decreases (THERE IS PRESSURE FOR THE U.S. DOLLAR TO DEPRECIATE. IN THIS SETTING, CHINA HAS TO PURCHASE DOLLARS TO MAINTAIN ITS PEG)…
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…
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.…
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,…