In the news Bush has been pressuring China to raise its currency. I was wondering what the consequences are if China obliges. So far China has been raising its currency but Bush is disappointed with its progress.
I was just wondering how this will affect international trade/business. I'm assuming if the raised currency will make American goods cheaper to the Chinese and Chinese good more expensive to the American market. This is my simplistic understanding on the matter and I want to learn more.
Hopefully someone can help me understand more about the topic.
Chinese products cost less against the dollar.
This means that while the buying power of the Chinese Yuan is lower, foriegn business investors still go there to produce products that would be much more expensive to produce elsewhere, such as in the US.
Commonly, the opposite is the case with a strong currency, but China takes undervalued currency to an extreme level with a lot of government support for industrial activity.
The chinese have been screwing around with the value of the dollar by pegging their currency to it for FAR too long. That must be fixed.
Ideally they can just float the value, but raising the value would be good too, though it could be much better.
To help with the $200 billion annual (and growing) trade imbalance with China.
Currency is not simply a rate in exchange, not simply a sign of dominion. It's the means of government to achieve political purpose.
U.S. government thought about not only the trade imbalance with China.
On the other hand, low cost of chinese products brought convenience to U.S. customers. Also lots of jobs are provided to Chinese people who need much less than others. An american worker's wage could afford 5 or more Chinese workers.
US need a helping hand on the free market, since over paid american (or european) labour cannot compete with low level wage countries like China.
It's an echo of the past when British gunships sailed up the Yellow river to "promote free trade" under gun point when China tried to close its border to British opium.
Nothing new here, only the beast is a bit harder to contain as it has been allowed to grow too much.
I just think Bush was trying to decrease the export products from China.
Perosnal View : Whenever Bush does something, its always for his own benefit or for the US(especially for the richest of the rich)
Right now, China is doing extremely well, they are growing at a rapid rate, and is making alot of money. If they raise the value of the yuan, china would eventually become like any first world country sooner or later. Costs become higher and multinational companies would move out searching for a cheaper alternative. If you guys didnt know, US is one of the country's with the most debt. Many people assume that their federal bank is actually goverment owned, when in actual fact it is a private bank , which the goverment has borrowed ton's of money from. The expenditures of the US are extremely high , and if they go at the rate their going, they might end up like Indonesia, with the rich extremely rich and the poor extremely poor. On the other hand living in China is cheap and the country is making alot of money, seemingly life is better there for the less well off folks.
Thx that helps interesting views and opinions