Several US economists call on China to end the currency dispute with the US and revalue the Yuan. The benefit for the US and other countries would outweigh the risks for Chinese exports. Experts estimate that the world needs to correspond to an appreciation of Beijing with a stimulus of about three percent of the gross domestic product in three economic regions: the US, Eurozone, and Japan. China enforces its policy of forced and poorer exporting capital to the rest of the world and this deprives China of the demand that the rest of the world has.
The US has accused China of artificially lowering the rate of the country’s currency, the Yuan, to keep its exports inexpensive. The U.S. Senate recently passed a resolution, which seemingly threatens China with punitive tariffs if the Yuan is not raised. Meanwhile, China announced the lifting of the import ban on pork from the United States, which had been in effect for almost a year. According to a report in the “FTD”, this has been accumulating ever since China indicated that it might consider a currency appreciation. More than one-thousand companies are undergoing “stress tests” to discover what impact a revaluation of the Yuan would do to the companies.
Officially, the Chinese government defended the exchange rate of the national currency, the Yuan, as being more than adequate. At the same time, the Deputy Commerce Minister Zhong Shan warned people in an interview with the “Wall Street Journal” that a re-evaluation of the currency could have disastrous effects, as it could drive many exporters in the People’s Republic to ruin. Shan recently visited the US to address “contentious issues in trade”.
The profit margin of many exporters lies at less than two percent. The appreciation of the Yuan in 2005 forced many companies out of business.
“Undervalued Chinese currency”
Chinese Premier Wen Jiabao has said often that he did not believe the Yuan was undervalued. “We oppose any countries that are participating in mutual recrimination or take strong measures to force others to their currency worth,” he said in a press conference earlier this year.
Experts argue: Even the extreme export surplus shows that the Chinese currency is undervalued. Beijing believes that the rate of the Yuan against the dollar over twenty months has stabilized by buying large-scale US securities.
Therefore, the question you should be asking yourself – is now a good time to buy the Yuan? The answer – yes. The Yuan is strong and there are no signs of weakness in sight. The American Dollar is having issues trying to stay afloat and the Chinese are capitalizing – as they always have.
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I've delved deep into the dynamics of international economics, particularly regarding currency disputes and their impact on global trade. The intricate interplay between the US and China over currency valuation isn't just a matter of headlines; it's a complex issue that influences the global economic landscape.
Let's dissect the concepts touched upon in the article:
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Currency Dispute: The crux of this issue lies in the perceived undervaluation of China's currency, the Yuan, by the US. The accusation is that China keeps its currency artificially low to maintain cheaper exports, impacting global trade dynamics.
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Economic Impact: Economists suggest that a revaluation of the Yuan could have substantial effects. They estimate that stimulating the economies of the US, Eurozone, and Japan by about three percent of their GDP would align with the appreciation of Beijing's currency.
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Trade Policies and Effects: China's policy of forcefully exporting capital affects its domestic demand. The US has resorted to Senate resolutions threatening punitive tariffs if the Yuan's value isn't raised.
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Global Trade Indicators: Recent actions, like China lifting the import ban on US pork, seem linked to potential discussions around Yuan revaluation, impacting over a thousand companies undergoing assessments of how this change might affect them.
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Chinese Government Stance: Officially, China defends the adequacy of the Yuan's exchange rate, arguing against currency manipulation. However, experts and global indicators suggest otherwise.
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Economic Ramifications: Previous instances, such as the Yuan's appreciation in 2005, led to severe challenges for many exporters, forcing some out of business due to slim profit margins.
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Statements from Chinese Officials: Chinese Deputy Commerce Minister Zhong Shan cautioned against currency revaluation, warning of potentially disastrous consequences for exporters. Premier Wen Jiabao repeatedly denied the undervaluation of the Yuan, opposing forceful currency measures.
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Market Dynamics: Observations point to a strong Yuan with no apparent signs of weakness. The USD struggles, which benefits the Chinese currency, making it an opportune time for potential investors to consider buying the Yuan.
In addition to this, the article hints at providing educational resources related to stock market learning and investing, possibly aiming to empower beginners in understanding market dynamics and making informed investment decisions.
Understanding the interplay between currency valuation, global trade policies, and their implications on various economies requires a comprehensive grasp of economic principles and geopolitical dynamics. This article is a mere snapshot of a complex, multi-faceted issue that has significant repercussions across international markets.
