Currency War Between China and Usa and Its Global Impacts on Economy Essay Example
Currency war between China and USA and its global impacts on economy.
Currency War:
Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a particular currency falls so too does the real price of exports from the country. Imports become more expensive too, so domestic industry, and thus employment, receives a boost in demand both at home and abroad. However, the price increase in imports can harm citizens' purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.
Reasons of Currency War Between USA and China:
Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency,but it happens when devaluation occur.
China keeps its dollar artificially low so that countries like the US will buy its goods. China is the US's largest trading partner and if they didn't sell their goods for super cheap, markets like India would be able to under cut the Chinese and then the US would buy goods from Indian instead of China. There is so much trade between China and the US that China profits immensely without needing it's Yuan to appreciate. This of course hurts the average Chinese person in that their labour is devalued but it beneficial for the country as a whole as it has quickly become a super power economicaly.
In 2008, a trader paid one Ghana Cedi for one U.S. dollar, but at the beginning of April 2012, the same trader travelling to Dubai paid GH¢1.74 for one U.S. dollar.
This means that year-on-year decline in the value of cedi against the US dollar was 74 per cent over a three-year period.
A point to note is that during the global economic crises of 2008-2009, the cedi
Currency War:
Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a particular currency falls so too does the real price of exports from the country. Imports become more expensive too, so domestic industry, and thus employment, receives a boost in demand both at home and abroad. However, the price increase in imports can harm citizens' purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.
Reasons of Currency War Between USA and China:
Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency,but it happens when devaluation occur.
China keeps its dollar artificially low so that countries like the US will buy its goods. China is the US's largest trading partner and if they didn't sell their goods for super cheap, markets like India would be able to under cut the Chinese and then the US would buy goods from Indian instead of China. There is so much trade between China and the US that China profits immensely without needing it's Yuan to appreciate. This of course hurts the average Chinese person in that their labour is devalued but it beneficial for the country as a whole as it has quickly become a super power economicaly.
In 2008, a trader paid one Ghana Cedi for one U.S. dollar, but at the beginning of April 2012, the same trader travelling to Dubai paid GH¢1.74 for one U.S. dollar.
This means that year-on-year decline in the value of cedi against the US dollar was 74 per cent over a three-year period.
A point to note is that during the global economic crises of 2008-2009, the cedi