China 's Growth Rate And Its Effect On The Economy

Since the reform and opening up, the economy of China grows significantly, as an emerging economy, China's economy has made tremendous contributions to the global economy, and Renminbi has become one of the most important currency in the world. According to the survey conducted by China National Bureau of Statistics found that from 1979 to 2012, China has attained an annual average growth rate of 9.8% for its national economy, while the annual average growth of the world economy is only 2.8 % during the same period. In past 30 years, China's GDP surpassed Japan’s, China became the world 's second largest economy, in addition, the huge total volume of trade makes China become the world 's largest trading nation. The contribution of China’s

Which goes back on how the dollar is back up. Another deal that countries see is that they can also exchange the Yuan which they have, to the federal banks of China into gold since their money is control in a gold standard economy.

Current market Situation is not that positive as early, because the crude oil price going down day by day in the global market. Another important fact is the growth rate of Chinese market is not that high as expected. It is very slow compare to the early situation.

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

China, the largest growing market in the world, currently has a policy regarding monetary regulation that allows the Yuan to “float”. This has seen the Yuan appreciate by approximately 24% over the past few years. Today, the exchange rate between the Chinese Yuan and the American Dollar is approximately 6.3 Yuan to 1 Dollar. Some argue that China should revalue the Yuan again the dollar, establishing a more fixed exchange rate. Others believe that current should allow

The renminbi currency has experienced a fixed exchange rate. The renminbi is seen as undervalued because the value of its currency has been scrutinized to be artificially low, which gives Chinese companies an unfair advantage over floating exchange rate countries such as the US. China has purchased more than $2.2 trillion in foreign exchange reserves in order to maintain an undervalued currency (Scott 2010). China buying US reserves increases the demand for dollars and increases the value of the dollar. Primarily, this makes Chinese goods cheaper in the US and US goods more expensive in China. Keeping a weak currency helps China to boost international exports because other countries purchase China’s goods at a relatively lower price. This helps to maintain growth in China’s economy and provide more manufacturing jobs, a staple to their economy.

(Yu 2013) Moreover, the bill is the violation of the rules of World Trade Organization. Nevertheless, it is undeniable that US must do something with the devalued yuan. The relationship between Washington and Bejjng has been about competition. Each days China becomes more and more influential and powerful. In this new world order, China builds and strengthening the networks to other countries and associations including the one which US is not the member such as BRICS (Brazil, Russia, India, China, and South Africa) and ASEAN plus three. China’s intervention in its foreign exchange markets gives China rapid growth. Yuan increasing becomes more important in as the means of exchange. For instance, in 2011 Japan and China, the second and third largest world economies, came up with plans to promote “the direct exchange of their currencies”. They want to “by pass the need to use dollar”. Moreover, this becomes the trend for the economies around the world to do “currency swap” agreements. They agreements would lead to the end of “Dollar Hegemony” and the start of “new international financial architecture”. (Yu 2013) United States should wait until China takes the action to devalue yuan by itself which will happen in the near future judging

conditions must be met by China before the nation can become a member of GATT

Interest rates rose in defense of the Hong-Kong dollar( which is pegged to the US dollars under currency board ). The People's’ Republic of China promised to support to Hong Kong by committing to not devalue the yuan so as to defend the Hong Kong dollar.

China has sustained a high rate of average annual growth in real GDP 10.1% between 1998 and 2008. The growth rate peaked at 14.2% in 2007 but slowed to 9.2% due to the impact of the Global Financial Crisis (GFC) on China’s exports and inflows of foreign investments. Hence, in 2015, China’s growth was 6.9%, falling to 6.7% in 2016 and forecast at 6.7% in 2017. Despite these recent slowdowns, the Chinese economy has seen a rapid rise in overall economic performance over the past years due to the introduction of globalisation. The Chinese government has capitalised on growth opportunities through policies promoting trade and foreign investment. Through the “Great Leap

Keith Bradsher's article (2012) about weakness at the Chinese export fair in Guangzhou highlights how different macroeconomic variables can affect international business. Bradsher notes that orders from Europe and North America are down for Chinese exporters. While there is disagreement about the exact cause, there is speculation about several variables. Many Western economies have struggled in the past couple of months as their economies have seen a faltering recovery. In addition, the Chinese renminbi is on a long-run appreciation, meaning that the Chinese exporters are starting to see their competitiveness reduced. A third factor is domestic to China, where wages and rents are rising quickly in key manufacturing areas such a Guangdong Province, the area around Shanghai and the Yangtze delta and the area around Beijing. At times, workers and rents are rising more quickly than the yuan is appreciating, setting the course for the long-run appreciation of the currency against the dollar.

So it is easy to conclude that china’s economic markets are sluggish and weak, for these reasons, China should adopt this monetary strategy to deal with these series of problems, and keeping the healthy and steady growth in economic markets. On the other hand, China wanted to increase the monetary (Yuan) liquidity, further, wanted Yuan to become international reserve-currency. Broadly speaking, China hoped to consolidate its central position in the global economic markets. In conclusion, pulling the healthy and steady growth internally and pushing Chinese monetary (Yuan) circulate in the international economic market, externally are the two key factors drove China to devalue Yuan.

There are a number of factors that influence currency exchange rate fluctuations. The determinants of exchange rates are differentials in inflation, differentials in interest rates, current account deficits, public debt, terms of trade, and political stability/economic performance (Van Bergen, 2012). Each of these factors influences either the supply of a currency or the demand for the currency. The value of Euro rose against the dollar over the past ten years for a few different reasons, among them rising deficits in the US, increasing demand for the Euro as a global currency, and rising inflation in the US during the middle part of the last decade.

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.

In recent years, China’s balance of payments always keeps “double favorable balance”. In 2005, China’s national economy developed quickly and stably. The exchange rat of RMB became more flexible. The current account surplus increased obviously and the capital account surplus decreased. The foreign exchange reserve still increased quickly. In 2005, Chinese government did some fiscal policy and monetary policy. Such as decreased government expense, raise the tax rate, used managed floating system, improve the foreign exchange management, enlarged the foreign exchange market. We can conclude that china’s BOP will still keep “double favorable balance” and keep