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China Faces Pressure over Currency - Assignment Example

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In the paper “China Faces Pressure over Currency” the author discusses the situation when china is refusing to let its currency the Yuan appreciate against the dollar. By having the currency artificially low gives China an upper hand by making its products cheaper in the US…
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China Faces Pressure over Currency
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Download file to see previous pages Making its products cheaper in the US and thus encouraging imbalanced trade. It has been universally agreed that the free-floating Yuan would be significantly worth 15 cents.
Chinese economists feel that the impact has been over-exaggerated and particularly to America from Yuan revaluation. In particular, a stronger Yuan will not reduce the US’s trade deficit as there is a very smart segment of overlap between China and America Production and hence the US will not be able to replace Chinese imports. The consumer will end up paying more for imports from china or Vietnam and this would be like imposing a tax on US consumers.
The World Bank chief also disagrees with the US’s suggestion on China's currency rise and he feels that China should not be forced to let its currency appreciate it as a way of rebalancing the world economy.
Some analysts see this move as China’s principal weapon in an economic struggle for global ascendancy. China having the advantage of selling the goods and services at prices lower than the other countries and thus making the products cheaper in the US markets and this allows the Chinese firms to recoup and regain a bigger share in the global market and steal jobs from the US manufactures. If China agrees to revalue the currency would result from the American manufactures regain the lost edge.
In the long run, the US economy will benefit from this inevitable downfall. De-pegging will force the hand of US politicians towards realistic policies and the Chinese will come to their senses and eventually would do it on their personal interest. An even more important difference is that the stakes are higher with China. Japan seemed like a fearsome economic rival. China with its billion populations seems destined to surpass the US economic clout. (1). ...Download file to see next pagesRead More
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