After years of speculation, China has finally dropped its peg to US dollar. The pegged value of the RMB or Yuan has been adjusted to 8.11 from 8.31. This humble revaluation of 2.5% will for the most part do little to ease the United States’ trade deficit. It does however have significant political and market implications. Most US Senators feel that the revaluation move was too small and that China needs to allow the currency to increase in value, especially since 2.5% pales in comparison to the RMB’s predicted undervaluation of 30-40%.
As well as this, China has had historically low levels of unemployment, thus, a trend of increasing unemployment levels indicates a worsening situation. We can see the extent to which the impacts of globalisation have had on China, through historical unemployment statistics. In 2009, unemployment reached a 30 year high of 5.4% reflecting the impacts of the Global Financial Crisis and highlighting that China is now increasingly exposed to external shocks. The movement away from labour intensive industries (i.e. manufacturing and agriculture) and the effort towards service based industries, due to the process of
The data and graph above is clear indication of the trade balance in the US trade with China over a five year period- it is a negative for the US. It is notable that the trade deficit has maintained a steady surge over the period in study. This indicates that as the years progress, more imports from China are arriving into the US than the exports from the US are reaching China. The effect of this trade balance cannot be u... ... middle of paper ... ...ced from the US economy due to the trade deficit with China. Most of these jobs are taken over by China citizens through outsourcing or companies re-locating to China.
If this is a sign of declining growth then the Chinese government will have to intervene and make the necessary corrections. Moving away from the industry sector to the service sector could be beneficial. China’s government is heavily involved with the economy and if the government fails to perform then the economy will suffer. Political corruption can deter business investments, which undermine the ... ... middle of paper ... ...the economy. Political corruption is ripe and there is very little that can be done to the top officials if they are corrupt.
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During the 20th century, the world believed that the renowned cities of the United States would provide modern spectacles emanating with futuristic qualities. However, within the past decade, the influence of China has creeped into the party of global dominance, establishing their footing on an international scale at a significantly alarming rate. In China, you can now experience the tallest skyscrapers, the newest airports, the fastest highways, and the best electricity grids in modern technology (Roasa). China’s evolution of success on the global scale is implemented by their supremacy in the economy through the labor of their workforce, which ultimately instills political power available at their fingertips. With this underlying superiority, the impact of China’s influence of economic power can affect international political and societal aspects, as they establish their economic empire in roots all over the world.
Considering the Mixed re... ... middle of paper ... ...current trade deficit. Yes there will be benefits associated with increase global competitiveness of the US products. However, there are other factors not associated with Chinese currency affecting the US global trade competitiveness. A case in point is the fact that from 2005 to 2008 when China allowed it currency to appreciate by 21%, a 30.1% rise of US trade deficit with China was still experienced. In addition by further putting pressure on China to devalue its currency, US runs a major risk of losing on capital inflows coming particularly from Chinese investors.
National economics are often adversarial in nature, a global contest where countries seek to gain advantage over their neighbors, all in the name of wealth and gain. America is no stranger to the game; the U.S. has been the world’s economic leader for the better part of a century. China, however, is the leading contender for the economic top-spot (), and America continues playing directly into China’s hand. America’s current trading posture with China is drastically skewed in China’s favor; if America is going to preserve its position as the leading economic power, existing U.S.-Chinese trading agreements will need to be revised, and additional regulations must be introduced to promote balanced dealing. The consequences of losing the global economic contest are very real.
No matter whether China is going to reach the US’s economy size in 10 years or not, after forty years since the US first opened trade with China in 1972, America’s economy gradually relies on China’s economy and will collapse without the strength of China’s market. In 1972, President Nixon visited China, and declared the open trade between America and China, a country that has been isolated from the West since 1949. Although most people remember President Nixon with his Watergate Scandal, he also opened a new trading era with People’s Republic of China. Nixon was in fact known as an anti-communist, and his presidency was during the Cold War, a political and military tension era between the US and the Soviet Union. In 1949, Chairman Mao Zedong established the People’s Republic of China.