Secondly, it could also be argued that United States and United Kingdom will not benefit in the long run due to the revaluation of the RMB. This is due to the fact that the real effect of prices in the two countries will move the exchange rate to the previous equilibrium. But in the short run countries trading with china will benefit from the revaluation of RMB. Other factors such as cheap labor and raw material prices also contribute to the cheap value of Chinese goods rather than only currency valuation. Even if the RMB is revalued, and consequently China retaliates through tariffs on the import of goods than this would not benefit United States and United Kingdom, as tariffs would increase the prices of these goods in the Chinese markets. Another measure that the Chinese government could resort to in case of revaluation of RMB is the provision of subsidiaries to its industries. This means that even if the Chinese goods become expensive in the international market on the basis of higher exchange rate of RMB, its effect could consequently be eliminated by the provision of subsidies (Corden 1994). This would decrease the cost of production which means that prices of these goods experience a decline and once again cost the consumers as in the pre-revaluation period.
Another reason for not revaluing the RMB is because the revaluation of RMB will decrease Chinese exports which mean that Chinese national income experiences a fall resulting in a fall in U.S. imports which would consequently cause...
Chinese Currency Issues Over the last several years, the issue of China's currency revaluation has been increasingly brought to the forefront. The reason why, is because many of the developed nations (i.e. The United States and the European Union) are experiencing unusually large trade deficits, while China is seeing trade surpluses. This is important, because issues such as currency disputes can have ripple effects on the world economy. Where, the
Cross-Country Capital Flows and Currency International Project overseas investment . GLOBAL INSTITUTES IN INTERNATIONAL FINANCE . INTERNATIONAL FINANCE CORPORATION . WORLD BANK . WORLD TRADE ORGANIZATION INTERNATIONAL MONTARY FUND . INTERNATIONAL FINANCE IN CHINA . BANKING INSTITUTES NON-BANKING INSTITUTES THE EXCHANGE RATE FIASCO FINANCIAL CRISIS IMPACTS ON SINO-AMERICAN RELATIONSHIP RECESSION'S AFFECT ON CHINA . ASIAN MONETARY FUND . CHINA'S TRADE POLICIES AND THEIR CONTRIBUTION TO THE FINANCIAL CRISIS Monetary policy is the study of circulation of money, the granting of credit, the making of investments and
China's currency policy may make that country the main country with whom the U.S. has a current account deficit, but if not for China the U.S. would have the same problems, just with another country for the protectionists to scapegoat. 3) I think an aggressive legislative posture is the best approach to take with regards to China's currency position. Ultimately, China is an economic actor the same as any other.
China announced on Oct. 28, 2004 the first interest rate rise in nine years. In this manner, Beijing is showing its willingness to adopt additional market-oriented reforms in order to have a tighter macro-economic control on the already overheated economy. Although the news regarding the evolution of the Chinese interest rate were contradictory, it would appear that North American economists are welcoming this interest rate increase. The Chinese economy is rapidly
The U.S. trade deficit and downward pressure on wages in many industries is more a factor of the Chinese manufacturing sector being more aggressive in lean manufacturing and efficiency practices (Taj, 2008) than any other factor. To demonize China is to miss the point of what it means to be in a market-driven global economy. Only after nearly going bankrupt and needing huge federal assistance programs are American automakers
Like what was state previously, the main reason for the peg to be in place was to help provide China, with consistent economic growth (by making certain that their currency will remain at a set rate). This has caused sharp divisions between the U.S. / world opinion and China, as a number of different countries believe that the current policy gives the yuan an unfair advantage on world markets. As
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