Note: Sample below may appear distorted but all corresponding word document files contain proper formattingExcerpt from Essay:
Most economists feel that if China's currency were allowed to trade freely, it would be a whole lot more. No one can know for sure how much more, but leading economists put it in a range of 10 to 40% higher value than it is now (Davidson 2006),
By keeping the Yuan artificially low in value, China is effectively giving the U.S. consumer a discount on all Chinese exports. By doing this they are discounting their own exports. This is good for many U.S. consumers because it allows them to buy cheaper clothes and electronics along with many other items. But on the other had it is bad for U.S. manufacturers who can't compete with low Chinese prices in the end. Some U.S. manufacturers have adapted by buying many component parts at a lower cost from China. The ability of a manufacturer to adapt depends on the company and the product and even on the level of globalization within an industry (Davidson 2006).
China's central bank is constantly buying U.S. Treasury bonds. This is done for technical reasons: in order to keep its currency fixed against the U.S. dollar, China must be able to redeem one U.S. dollar for 8 Yuan. As China's economy grows, it must be able to buy more and more U.S. currency in order to meet the growing number of Yuan. Due to the fact that China keeps buying U.S. Treasury bonds, the Treasury Department is able to keep long-term interest rates lower than they would be if they weren't. If China didn't buy so much, the U.S. Treasury would have to raise rates in order to attract other investors. Since Treasury bonds are the standard for most long-term debt, the lower rates are extended to credit cards and mortgages. These low mortgage rates fueled a dramatic housing boom, which raised the price of many homes. All those inflated home prices injected countless billions of dollars into the U.S. economy which left many Americans with home equity and cheap debt (Davidson 2006).
It is thought that a revaluation could cause an economic slowdown, even a recession in the United States. If China were to revalues its currency abruptly, it wouldn't have to buy so many Treasury bonds. This would result in mortgage and credit-card interest rates jumping upwards. This would prompt U.S. consumers to stop spending. Stores and banks would lose money. U.S. And Chinese factories wouldn't be able to sell any products. And this would mean they would shut down or lay off workers. This revaluation could bring a self-reinforcing downward economic spiral (Davidson 2006).
Chapter 6 - Conclusion
Most economists and policy makers in the United States and in China agree that, eventually, China will have to revalue its currency or the U.S.'s deficit with China will grow too large. There is quite a difference of opinion over how quickly China should revalue and what other measures need to happen to prevent painful economic costs. It is certainly theoretically possible to make the right adjustments in the right way so that both countries will keep growing, but it is also possible to do it all the wrong way (Amadeo 2009).
China is the largest bank that is in use by the U.S. This fact gives it tremendous leverage. In 2007 China allowed the Yuan's value to rise by 20%. In 2008, China pledged 4 trillion Yuan or about $580 billion, to stimulate its economy in order to avoid a recession. The funds, which represented 20% of China's annual GDP, were spent over the next two years. They also increased tax deductions for machinery, which saved businesses 120 billion Yuan (Amadeo 2009).
The economy in China appears to have a great influence on the global economy. They use the Yuan to control their prices which allows them to export goods at significantly lower prices than anyone else can. This in the end encourages investors to invest in order to keep prices and costs down, which helps them to realize a bigger and better profit. This in turn helps to increase competition across all markets which help to stimulate the global economy as a whole.
Chins seems to have a great deal of economic power across the globe. It is very important that the United States continues to work closely with China through the current economic downturn so that recovery comes quickly. It is important that everyone involved continues on a path that is best for everyone involved. This is will help to ensure that all industrialized countries recover from the current economic situation and once again begin to flourish and prosper. The economic power that China has around the world is one that needs to be harnessed and used to the good of everyone. This would not only benefit the people of China but all people around the world who have dealings with China in an economic way.
Amadeo, Kimberly. 2009. "China Economy." Available at:
Borjas, George J. And Ramey, Valerie a. 2000. "Market Responses to Interindustry Wage
Differentials." Available at:
Buckley, Chris. 2009. "China paper urges new currency order after 'financial tsunami' ."
Available at: http://www.reuters.com/article/ousiv/idUSPEK4365020080917?sp=true
"China posts 8.9% third-quarter GDP growth" 2009. Available at:
Chow, Gregory. 2000. "China's Economic Reform and Policies at the Beginning of the 21st
Century." Available at:
Davidson, Adam. 2006. "How China's Currency Policy Affects You." Available at:
Ding, Xiaoqin. 2009. "The Socialist Market Economy: China and the World." Science & Society, vol. 73, no. 2, pp. 235-241.
"Economic policy needs 'rethink'." 2008. Available at:
Gallagher, Kevin P. And Porzecanski, Roberto. 2008. "China Matters. China's Economic Impact
in Latin America." Latin American Research Review, vol. 43, no. 1, pp. 185-200.
Lall, Sanjaya, Weiss, John, and Oikawa, Hiroshi. 2005. "China's Competitive Threat to Latin
America: An Analysis for 1990-2002." Oxford Development Studies, vol. 33, no. 2,
Levy, Phillip I. 2007. "After the SED: Evaluating the U.S.-China Economic Relationship."
Available at: http://www.aei.org/article/26415
"No change in China's macro-economic policy: official." 2009. Available at:
"Trade Policy Initiatives: Office of China Economic Area." n.d. Available at:
"Wen: China's economic policy unchanged." 2009. Available at:
Xiaoling, Wu. 2007. "China's Exchange Rate Policy." Available at:
"Education Principles Of Economics China's" (2009, October 22) Retrieved December 7, 2016, from http://www.paperdue.com/essay/education-principles-of-economics-china-18357
"Education Principles Of Economics China's" 22 October 2009. Web.7 December. 2016. <http://www.paperdue.com/essay/education-principles-of-economics-china-18357>
"Education Principles Of Economics China's", 22 October 2009, Accessed.7 December. 2016, http://www.paperdue.com/essay/education-principles-of-economics-china-18357
China Trade Policy China's agricultural trade policies are driven by its need to feed its massive population. The country has quotas that average 15.8%, with 5.8% of products being duty free and 1087 total tariff lines. These duties sit in line with EU levels, above U.S. levels and below developing world levels. China aims to reduce its agricultural tariff below 15% in the coming years. China supported India's stance on special
China's Rise: The strategic Stake While we have so far discussed the positive economic impact of a growing China from the perspective of Australia, there are also some concerns about China's growing stature and the changing strategic balance. As a communist nation, the U.S. And its allies including Japan have always viewed China with caution. China has repeatedly claimed that it is fully committed to peaceful economic growth as Zha Peixin,
China's Intellectual Property Rights: Current Issues, Strategic Considerations And Problem Solving In this paper, the focus is primarily on the Intellectual Property Rights (IPR) that are given to individuals within the Republic of China. The paper starts off by defining IPR and the different ways that IPR is provided like copyright infringement. The paper them moves on to define IPR and its progression in China through the imperialistic years, the era
China's Economy And Foreign Policy There have been radical changes in the internal political and economic scenario of China during the last two decades. (Lampton, 2001) The growing economic stability and control has increased the status of china to a great extent among its trading counterparts. Further, it has become obligatory on the part of the Chinese Government to make it certain that the economic development to restructure the political discipline
S. intelligence and military analysts expected, prompting fears that Beijing will attack Taiwan in the next two years, according to Pentagon officials." However, the Taiwanese spokesman, Chang Jung-kung, says this report is inaccurate, noting that the Pentagon does not take into account the latest development between Taiwan and China, who have entered a new phase since Chairman Lien Chan's journey of peace to China in 2005. China also responded by
Despite the high costs the Four Modernizations implied, China succeeded to enter "into the milieu of international bank loans, joint ventures, and whole panoply of once-abhorred capitalist economic practices." As it might be inferred from above, this task was not an easy one, and China's officials had first of all to convince the rather-conservative part of the population of the necessity of these reforms and of the continuity of the
history of China's importance to the U.S., from Nixon's visit to China in 1972 to the present, which contributed to the implementation of Obama's 'U.S. Pivot to Asia Strategy'? The Cold War represented one of the most important periods in the history of the world. It did not only changed the way in which the political world was configured following the end of the Second World War, but, at the