The one major... ... middle of paper ... ...f the Yuan increases the risk for default on non-performing loans for the country’s banking sector. China’s banking system has a significant amount of non-performing loans and although there’s been a mobilization to solve this problem, with many of the non-performing loans being exported and bought by large US investors, it is still a problem that exists to some extent. An increase in the value of the Yuan will automatically increase the value of the non-performing loans. Also, the Chinese government has massive amounts of US dollar assets, which they used to peg the Yuan. These assets will lose value in proportion with the revaluation of the Yuan.
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.
Globalization has been a very controversial topic through out our word today; China has been a great example of what globalization can do to a developing country. But when we look deeply into the roots of china we realize china may not have benefited as much as some think. China has had one of the richest cultural backgrounds in the world. This majorly changed as globalization worked its way into the heart of china; changing the culture with it. After china opened its doors to free trade it became a central for factory lines.
This paper aims to argue why China’s surplus is neither good for China nor the U.S. in terms of “exchange rate manipulation” and “high savings rate”. Therefore, the intention of this research is to study how these forces may affect the economic development of both countries as well as their current consequences. LITERATURE REVIEW The economic relationship between U.S. and China has been expanding considerably over the last three decades. According to the World Trade Organization (WTO) data (2008), the total U.S.-China trade has increased from $5 billion in 1980 to $409 billion in 2008. Furthermore, in 2008, China was the second largest U.S. trade partner, its third most principal export market... ... middle of paper ... ... producer would be also convenient for the consumer.
The United States and China’s economic partnership has increased dramatically over the past years. Having a big population and a fast paced economy, China is a major market for the U.S. government. Thus, economic ties have stretched due to several issues, including China’s vast and expanding trade goods to the United States. China's fast transition to higher status, the U.S. and China merger has pushed the international relations into the spotlight of the world today. Due to its low rate of saving, the United States takes from outside sources to finance the federal budget deficit.
Analysis of the US-China Trade The U.S. trade deficit has risen more or less steadily since 1992. In the second quarter of 2004, the trade deficit relative to GDP surpassed the 5 percent mark for the first time. Many economists already considered trade deficits above 4 percent of GDP dangerously high. The fear is that continued growth in this external imbalance of the U.S. economy will ultimately spook overseas investors. http://www.americanprogress.org/issues/2004/09/b193700.html The United States and China share the most imbalanced bilateral trade relationship in the world.
As a result of observing the economic data in China and the US, the business relationship of China and the US has really changed in some ways. One of the most significant cases is that the increase pace of foreign capital in China is slowing down recently. According to the database of the National Bureau of Statistics, the total foreign capital in China increased from 867.164 billion RMB in 2004 to 1,975.588 billion RMB in 2011, that is about 2.5 times multiplied. However, after 2008, the increase rate in total foreign capital dropped from averagely 18.9% to 5~6%. Referring to the inflation rate, it is actually not an increase but a decrease instead.
Trade liberalisation and the reduction in bureaucracy has enabled overseas firms to enter the Chinese market to take advantage of cheap and vast labour, creating millions of jobs. However, the privatisation of state-owned enterprises in the face of international competition as well as economic restructuring has also simultaneously led to mass job losses, especially in rural areas, posing a challenge to the Chinese economy and the government. During the period 2009 to 2015, China’s urban unemployment rate averaged 4.8% which is lower than the world average of around 7%. However, the real unemployment situation is likely to be more serious as migrant workers and newly graduated students are not included in government statistics on unemployment. As well as this, China has had historically low levels of unemployment, thus, a trend of increasing unemployment levels indicates a worsening situation.
Also they believe that given the size of China's economy if China's currency reaches its market level many global imbalances may be reduced. US borrowers are affected by an undervalued RMB. If there is a current account deficit with China an equivalent amount of capital flows into US from China. Hence as a result US has an increased amount of capital at its disposal because Chinese investors are inve... ... middle of paper ... ...a that China's central bank is sitting on huge amounts of forex reserves. It hold huge amounts of US Treasury Securities which it has accumalated in past thirty years.
Although America’s economy is growing as time goes on, China’s economy is also growing. China’s growing rate is higher than America’s, and if this continues, China’s economy will soon pass America and takes its place as number one. Before Bill Clinton presidency, America was in a economical deficit state but after Clinton presidency the country was in a economical surplus, but when George W Bush left office, America was in an economical deficit because the government has been overspending and spending more money than they receive from taxes. This shows a trend, because America has went from a deficit to a surplus and back to a deficit. This deficit had only worsen until 2013, where the economy finally began to rise again which shows the trend of rise in economy again.