Introduction. In A Recent Article, New York Times Writer

1653 WordsApr 26, 20177 Pages
Introduction In a recent article, New York Times writer Eduardo Porter argues that Trump made the right decision in not naming China as a currency manipulator, but also argues that China practiced this in the past to the detriment of the U.S. economy. There are three criteria for a country to be considered as a currency manipulator, and China only follows one: “It must have a significant surplus with the United States.” This surplus is large at $350 billion, but with the rest of the world it’s only 2.4% of China’s GDP. Therefore, the majority of economists no longer consider China to be a currency manipulator. But in the past, China did fit this criteria. From 2000 to 2014, China suppressed its currency in order to increase the demand for…show more content…
Theory Review and Analysis A country intentionally lowering the value of its currency may not seem like it would be beneficial to the country’s economy, but this practice does in fact have its advantages, which is why some countries have used it. To do this, a country, for example China, would overprint its own currency and then use that currency to buy U.S. dollars, which decreases the amount of U.S. dollars. This means there is more of China’s currency, the renminbi, relative to U.S. dollars. With more of China’s currency in the market, the renminbi’s worth decreases (Forbes article). With China’s currency worth less, Chinese goods are cheaper, so the U.S. and other countries’ demand for exports from this country increases. This demand in exports helps China’s economy grow. This is overall consistent with what we talked about in class and with economic law in general: an increase in the price level will increase aggregate demand for goods and services (Mankiw 20-3). According to Chapter 19, section 19-3c of the textbook, a country’s currency can also weaken in foreign exchange markets when the country sees an increase in capital outflow. This is because the outflow becomes inflow in another country, say, the United States, and this increase in inflow strengthens the

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