Are the Forces That Influence China's Trade Surplus Over U.S. Actualy Good For Both Countries?

For the last twenty eight years, China has been quickly growing into one of the largest economies in the world. China has accomplished this feat, in part, by radically changing their policies on trade and free market interactions with other countries. During this process, China has bought approximately one hundred trillion dollars of United States debt in the form of Treasury bills, notes, bonds, and Inflation Protected Securities (Amadeo). This debt has given China leverage against the United States which has enabled China to keep the value of the United States dollar high, while keeping the value of the Chinese yuan low. As the inflation of the dollar continues to negatively affect the

In conclusion, I think that China should change its policy because it is damaging not only the U.S. economy but the economy globally. Countries such as the United States are still recovering from the economic recession we are still leaving in. It is obvious that if China let the Yuan appreciate their exports will decrease and imports will increase making their trade surplus to decrease. If this happens international countries will be grateful because by this happening means that their export will increase and employment will increase. Countries should avoid doing currency manipulation or artificially devaluing their currency because it just hurts the global economy and it promotes other countries to do the same – it hurts everyone.

China’s economical strength comes from its international trades as the economy has grown to a rate of 10.3% in 2010. It has become the world’s largest exporter in the global economy. In the

The influence China is having on the United States is extraordinary. As America continues to drastically import and purchase from China, China is purchasing and investing in valuable American assets. Some of these assets include energy, entertainment, food, aviation, minerals, land and other businesses. Although we operate in a global economy, the positive short-term gains by American companies selling to foreign investors may lead to negative long-term consequences. Countries such as China are literally buying tangible assets on American soil. This trend could affect commercial prices, resources, supply and demand. When a foreign company or individual owns rights to assets in the Unites States, American citizens could be subject to their conditions. Americans could be at the mercy of market conditions set forth by an entity to whom we are directly competing with on a global scale. For better or worse, China has great influence on inflation, monetary policy and acquisition within our own borders.

In our quickly expanding global economy, how states execute trade is more important than ever. Global organizations like the International Monetary Fund are established to help the states trade and regulate trade currencies. These global organizations are not always efficient, and can lead to imbalances in trade currency. “For more than a decade, the U.S. and other countries castigated China for its currency policy, saying the yuan’s level gave the country’s exporters an unfair advantage at the expense of its trading partners (Talley 1).” Since free trade always seems to result in trade deficits that are detrimental to the United States, the discussion should center on correcting the trade imbalance in an effort to have these free trade treaties fairer for all sides by imposing tariffs on China.

In 2013, America imported over 440,433.5 million dollars’ worth of goods from China but only exported 122,016.3 million dollars. (U.S. Census Bureau Foreign Trade) If America and other countries trade so frequently with China and rely so heavily on Chinese manufacturing, production, and innovation, then the aspect of currency manipulation within China and its potential negative effects on world trade is a very significant topic of importance and reason to research the subject. Our

In reality, however, trade with China has economically compromised America. Unfair trading has caused U.S. exports to China to diminish, cost the U.S. millions of jobs, and caused the U.S.’s trade deficit to grow to record levels (Scott). Even balanced deals quickly bias to China’s favor through China’s market manipulation strategies. Free-trade, it seems, is neither fair nor impartial when one of the parties is not actually free, as in China’s case. Assuming China will not simply adopt a free-market to level the playing field while it is tilted in their favor, controlled trade should be introduced between the two countries in order to provide a balanced venue and mitigate the impact of state-controlled influence on the free market.

2016 is a very sensitive year for China and U.S. relationship. Should China and the United States cooperation or friction became a really important question between the two biggest economic countries in the global market, China is a newly growth young age economic developing country, and the U.S. as the head of the global market for years, two of them check and balance each other, but actually they should be work more compactness. The United States had been interested in China since 1784, at the end of World war II America “kept China from fragmenting and limited foreign exploitation.” (heritage.org), American and China had an intricacy history which also is a key point of the relationship between this two country. (heritage.org), As the presidential election underway, China’s relationship with America because a campaign issue for decades, both Donald Trump and Hillary Clinton indicate their point of view between the relationship with China, Donald Trump now as the newly president of the U.S. who will take over the office on Jan 20 of 2017, some of his positons on the future trades’ plan with China will significantly affect the relationship with China. (uschina). According large among of research, easily shows that China and the U.S. owns many factories and power on the global effect. They both are the permanent member of the United Nations which row a higher level of stands at the United Nations.

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%.

My interest in International Economics, led me to apply to the Seward Fellows program – an honors program at Union College – and as part of that program I designed an independent theme minor to analyze China’s trade. Since I applied to graduate one year early when I was a sophomore, I chose to compress my two-term Seward project in six weeks in the summer of second year. My Seward project was to investigate the behaviors of the yuan-USD exchange rate in the past ten years. After evaluating the growth rate of the ratio of China’s foreign reserves over imports from 2005 to 2014, I noticed that the year of 2009 was a turning point; before

“The real currency war is actually between Chimerica -- China plus America -- and the rest of the world,” Ferguson said in an interview at the World Knowledge Forum in Seoul. “It would be much better to have some kind of Plaza-like international agreement and I very much hope that at the G-20 summit in Seoul next month this will be No.1 on the agenda.” The Plaza Agreement reached in 1985 prompted a decline in the U.S. dollar against its Japanese and German counterparts. Brazilian Finance Minister Guido Mantega said last month that a “currency war” was under way, in which economies are weakening currencies to support exports. At an International Monetary Fund meeting this month in Washington, finance chiefs failed to narrow differences over currencies, with China accused of undervaluing the yuan and low U.S. interest rates criticized for flooding emerging markets with cash. “Currency appreciation is necessary,” Ferguson said in the interview late yesterday. “If you insist on building up a vast horde of dollar-denominated reserves you will create distortions in the world economy that will ultimately come back and bite you.” China doesn’t need a dollar peg, because its workers

In 2013 Yuan appreciated by 2% as People's Bank of China allowed market forces to push the Yuan. Exporters have been hit hard by this move who relied on weak currency to remain competitive in international markets. But this controlled rise of the currency has still left countries sceptical that China will not intervene in forex market. Chinas forex reserves have increased tenfold in the past decade. Due to the resulting trade surplus central is forced to intervene to preven the Yuan from appreciating.In the 3rd quarter of 2013 China's forex reserves have increased by more than $163 billion to a record 3.66 trillion US dollars.. Despite a 0.3% decline in exports in September agaisnt an expected 6% rise , the increase in forex reserves is a clear evidence of market intervention by the central bank. In March central bank deputy governer said that China will reduce its interventions and will follow a more flexible currency policy. But an analysis of export data shows that central bank intervened in the currency market to prevent fluctuation of the currency. Even though Yuan has strengthened by 4-.4.3% over the past 2 years economic growth drivers have not shown any significant change.

The foreign reserved of China is valued at $3.8 billion that is highly attributable to the foreign exchange policy adopted by People’s Bank of China. There is a need for a different theory to provide reasonable explanation for the persistence of Chinese monetary regime despite the fact that there is a negative correlation between the growth of foreign exchange reserves and money supply.

In the statement of the 2015 Article IV Consultation Mission to China, the International Monetary Fund (IMF) concluded that the Chinese economy was transitioning to a safer and higher-quality growth. In particular, the IMF highlighted that China had made good progress in recent years in reducing its large current account surpluses and its huge accumulation of foreign exchange reserves. Although undervaluation of the yuan was a major factor causing the large imbalances in the past, the appreciation of the yuan over the past few years had brought the yuan-USD exchange rate to a level that was no longer undervalued.

Abstract: Recently, the appreciation of RMB has been a hot topic and caused a heated debate. For China, it not only involves the changes in the RMB revaluation, but also affects China 's external trade. Through reviewing the RMB