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China and Recession - Essay Example

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China is famously known to be a land which did not allow the outsiders to trade in its country. However in the recent years China has allowed the outside world to invest in its country which has changed the level of economics in China. It has lead to the boom of the Chinese economy and furthermore is expected soon of these investments…
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Download file to see previous pages This relationship was further enhanced and China adopted the same policies as that of the United States. It encouraged private sector companies to invest more and adopted a stance which America had already adopted. This stance adopted by China has grown since and is now a threat to go beyond the economy of America. This article would further examine the details of this bilateral trading relationship. 2
The trade deficit faced by the United States has risen up since the beginning of the 1990s. In 2004 this trade deficit relative to the Gross Domestic Product exceeded the mark of 5 percent. It is said that this deficit can be very dangerous once it reaches the mark of 4 percent. 3This deficit faced can ultimately fear the investors to run away from the United States economy. The relationship between China and the United States is known to be the most unbalanced. The products imported by the United States from China are more then the exports that are of $202 billion dollars per annum. The trade imbalance among these two countries is enhanced by the facts of China's working force and the consumer base. Most of the population in China still lives in the rural areas. This helps to the fact of lower working wages in China as the rural people in China are demanding less charges for labor. These low wages contributes to the lowering of the prices of the products. And hence the consumers prefer the Chinese products over all the American products4. A new research done in Washington describes the trade deficit with China as a cost to the jobs in the United States of America. This research further found out that millions of jobs were lost due to the low wage workers of China. As the products made by the Chinese companies are cheaper the demand for them is increasing day by day. 5The poor consumers prefer using the Chinese products than that of the Americans; this is because of the lower rate of these products. The prices of clothes and electronics have decreased significantly due to the Chinese companies. The companies of the United States which have not been located in China have suffered major setbacks due to this trade deficit. The garment industry of America has been struck majorly by these blows. Home appliances and electronics are largely being manufactured in China and are being further sold in the United States.
Devaluing of a certain currency is done to rectify the problems one country is facing. It can help one country to get over the debts it is facing and would provide a path to the outsiders (civilians) to take advantage. As said by one of the Chinese man when dollar was devalued "I can travel more frequently and stay longer in my favorite cities as the currency is devalued". It helps in achieving the goals of social and economic integrity. Devaluing a currency can help the country to slim its trade deficit, can create jobs for the locals and can boost the exports. 6A situation arose for the United States in which the trade deficit was increasing every fiscal year and some strict action had to be taken against it. In response to this the United States devalued the currency of dollar to adjust to the monetary problems faced by it. This action taken by the United States is thought to have some effect on the relationship between the United States ...Download file to see next pagesRead More
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