Oct 26 2009
Exchange rates, currency manipulations, and the balance of trade
Published by Jason Welker at 3:10 pm under Balance of Payments,Balance of Trade,Barriers to trade,China,Currency,Exchange Rates,Foreign exchange markets,Recession,Trade,WTO
FT.com | The Economists’ Forum | Imbalances and undervalued exchange rates: Rehabilitating Keynes
In our year 2 IB Economics class, we are beginning the part of our International Trade unit on exchange rates and the balance of trade . While the market for a particular currency reflects many of the same characteristics as a product market (i.e. upward sloping su
pply curve, downward sloping demand curve), the consequences of a change the price of a currency (the exchange rate) is far more powerful than a change in the price of a particular good or service in a product market.
How does the value of a country’s currency affect that country’s balance of trade with other countries? To understand this important concept, we first need to know something about the process by which currencies are exchanged when two countries trade. Let’s look at an example:
When an American consumer wants to buy an iPod that was made in China she will have to pay for it in US dollars, since that’s what she earns her wages in from selling her labor in the resource market. Apple now has the consumer’s $300, which gets split up to cover all the costs the company faced in the manufacture, distribution, marketing and sale of the iPod. Part of that $300 (say $100) will go to the manager of the factory in China where it was made.
The factory manager in Shanghai faces his own costs he must cover. He must pay rent on his factory space, interest on the loans he took out to acquire capital, and wages to the workers assembling iPods on his factory floor. The problem is, these costs are all in Chinese yuan, but he’s holding the US dollars that Apple paid him for his iPod. In order to cover his costs, the Chinese factory owner must take the $100 to a Chinese bank and swap it for RMB. The local bank that changes his money now hands the $100 over to China’s central bank (the PBOC) which prints and exchanges RMB to the bank at whatever the prevailing exchange rate is at the time.
Ultimately, China’s central bank will decide what to do with its holding of US dollars. Most of the dollars are loaned back to the United States through China’s purchase of US Treasury securities (the IOUs the US government sells to finance its deficits). China’s voracious demand for US dollar denominated assets keeps the demand for (and the the value of) dollars high on foreign exchange markets, meaning the RMB remains relatively cheap for Americans and therefore Chinese manufactured goods attractive.
China’s policy of exchange rate manipulation has upset many American politicians over the years, who often blame China for America’s shrinking manufacturing sector. A weak RMB means the cost of producing things like iPods in China is far lower than it would be in the US. By keeping demand for dollars high on the foreign exchange markets through its incessant demand for US treasury securities and other financial and real assets, while simultaneously hoarding vast reserves of US dollars in its central bank, thus keeping supply of dollars on foreign exchange markets low (see graph), China has prevented the RMB from appreciating, fueling the growth of the country’s export-manufacturing sector.
China’s currency manipulations may soon ilicit a response from the United States as president-elect Barack Obama takes office next year. Facing a recession and rising unemployment, combined with the recent appreciation of the US dollar, the pressure is on Obama to take immediate action to restore America’s manufacturing sector. According to the Financial Times blog “the Economists’ Forum”:
If the US economy takes a downturn and the dollar continues to strengthen, a resurgence of protectionist pressures is likely. This time around, these pressures could well take the form of unilateral action against competitive currencies. It is noteworthy that President-elect Obama has actively and repeatedly supported action against “currency manipulation.”
The “competitive currency” perceived to pose the greatest threat to America’s inustrial sector is certainly the Chinese RMB. Currency manipulation is a form of protectionism, which in a time of global economic slowdowns poses a larger threat than ever to both developed and developing nations’ economies alike. For this reason, the World Trade Organization may need to employ carrot and stick methods to create incentives for China to liberalize its currency controls and allow the RMB to strengthan against the dollar and other major currencies:
How would this new rule against undervalued exchange rates be incorporated in the WTO? Through negotiation. The (WTO) should place rules on undervalued exchange rates…. The US and EU have been the principal demandeurs for action by China in the past. But it is important to remember that until very recently, a number of developing countries—Brazil, Mexico, Korea, Turkey and South Africa—were affected by the competitive pressure from the undervalued (RMB). Indeed, some months ago, the Indian Prime Minister urged China to follow a more market-based exchange rate policy. For obvious reasons, more emerging market countries have not voiced their concerns, but it is possible that a coalition of affected countries could unite on this issue.
Clearly, Chinese concerns have to be addressed for any new rules to be crafted and commonly agreed… First, China’s major trading partners could pledge granting China the status of a “market economy” in the WTO contingent on it eliminating currency undervaluation and moving to a market-based system. This status would have significant value for China by shielding it against unilateral trade actions such as anti-dumping and countervailing duties by trading partners. Second, as part of radical governance reform of the IMF, which is desirable in itself, China should be offered a substantially larger voting share in the IMF commensurate with its economic status.
Discussion Questions:
- How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
- What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
- What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
- Exchange rates and trade: a delicate balancing act, currently out of balance!
- How do changing interest rates affect exchange rates? The example of the RMB
- Lesson plan: Elasticity, exchange rates and the balance of payments – understanding the Marshall Lerner Condition
- Another question from the Help Desk: Relative price levels as a determinant of exchange rates
- Bouncing back to inflation, and managed exchange rates in Singapore.
In answer to the first 2 discussion questions:
China's manipulation of currencies gives it an unfair advantage on the global market, in terms of exports. By having a weak currency, foreign consumers find chinese good more attractive: for example, the yen is very weak compared to the euro. As such, a german consumer has to exchange fewer euros for the same number of yens (compared to if the yen were strong). Chinese producers who export say, toys will still receive the same profit (as it is in yen) but the the german consumer, chinese toys appear cheaper, because he has to give less euros to pay the same price.
This "cheapness" causes a high demand for chinese exports, while, by the same token, as other currencies are strong compared to the yen, other countries' goods (those of china's biggest competitors) seem expensive to foreign consumers.
This threat to the exports of china's competitors causes a significant fall in exports, and thus a fall in GDP and aggregate demand. In times of recession, as in the US right now, this poses a great potential problem, as it could worsen the recession.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
When a currency is devalued this means that the value of the currency is lowered. Even though it may seem strange some countries, like China, may prefer a devalued currency, or believe it can benefit. Like Palmi already said, with their weak currency China is able to attract foreign consumers with their exports by their low prices, therefore increasing exports. Clearly the lower prices will mean that now Chinese exports are the most in demand as opposed to other countries, due to the higher prices. This is an evident threat to the industrial economies of its largest trading partners, like the US, because when Chinese exports are going to be expanding, the trading partners imports are going to be increasing as well, and this can lead to a current account deficit.
What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
Additionally, some possible purpose's why China would try and maintain the value of the RMB low, relative to other currencies of the other nations is that by having a low value of currencies (therefore a low exchange rate) a country like China can increase exports, because they relatively cheaper. Thereby, they will be able to increase their employment in the export industry. Consequently, if there is greater exports and less imports (because now they are more expensive) the domestic industries may benefit because now their domestic consumers will prefer domestically produced goods, increasing employment.
Like or Dislike:
0 
0
I agree with the answers that Palmi gave for the questions. It is true that the foreign consumers will find Chinese products more attractive if the RMB is kept low. This is a benefit for the foreign consumer, and Palmi already explained this with her German consumer. She also mentions in terms on export, this is true because when china is importing with a weak RMB, it will have to pay more for the same amount. So when China imports it is not beneficial for itself. I think this is also the reason why it is called a form of protectionism. When the Chinese are keeping their RMB low they are also protecting their market, by decreasing imports. Since it is more expansive more firms to import, the imports will fall. But again there are benefit from this for China. Since the low exchange rates made the imports more expensive, the domestic consumer will buy the products in the domestic markets. This can led to a decrease in unemployment in China. Since there is also a high demand for the exports, it can also create employment in the export sector. These could also be China’s reason for keeping the value of the RMB low, relative to the currencies of other nations.
Like or Dislike:
0 
0
I thought this article was very interesting and a great way to show how economies can be influenced by exchange rates. I find it really amazing how China has controlled its economy because of exchange rates. What China has done is make its own currency seem really low so its exports seem relatively cheap to other exports and local products. This means that consumers prefer china's exports because they are cheaper. This is how China has been able to grow so quickly in the past couple of years, because of its exports(most of China's GDP is its exports). Another effect of a weak currency is that imports seem more expensive, causing consumers to buy more domestic products.
To solve this problem Obama can try to use protectionism against China, but the problem is that cheap imports from China also benefit the consumers in the US. Obama can try to use protectionism against Chinese goods but this would only benefit the US producers and not the consumers in the US.
Like or Dislike:
0 
0
China is using protectionism to protect its currency, RMB, by keeping it where the government want it to be, low, as Robin said.
If China would not chose to do that, it would affect their whole economy because as their currency would get a lower value, their prices on goods and services would have to increase and foreign consumers would therefor face a higer price and would chose to buy their goods and services elsewhere, and China would lose a lot of their exports and consumers.
(What China does to keep its currency where they want it is to keep as many of their dollars as possible, which is a good thing for the US right now aswell since if China would let go of their dollars, the dollar value would lose even more in value.)
Like or Dislike:
0 
0
I mean there are benefits to China lowering their value of their currency. However, are there no disadvantages in the long run?
If the exchange rate is in danger of falling, then the government will have to raise the interest rate in order to increase the demand for the currency – however, this will have deflationary effect on the economy, lowering demand and increasing unemployment. This means that the domestic macroeconomic goal (low unemployment) may have to be sacrificed.
Also, if the exchange rate is set at the wrong level, then export firms may find that they are not competitive in foreign markets.
If China sets artificially low exchange rates level, then that may cause international disagreements. That is because a low exchange rate will make a country's exports more competitive on world markets and may be seen as an unfair trade advantage.
Are there chances of this happening to China?
Like or Dislike:
0 
0
That is exactly the problem if Obama protects the US economy from the cheap Chinese imports. He does not only fight the cheap RMB compared to the US$, but raise the prices of the imports and with that the real income of the average US citizen decreases as they mostly depend on these import. With this dependency that China has the advantage in trade. So with the artificial low currency China is in a way dumping its goods in the US and destroying the local economy which creates a dependency on Chinese goods. So the real problem in my opinion that the US is facing is dumping which resulted from the artificial weak currency.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
The policy of China is a combination of low cost of labour, its main competitive advantage, and exchange rate. Leveraging on low salaries and wages China has become the "world factory" for a huge variety of products with a low content of technology and know-how. Export consumers prefer chinese products simply because they are cheap. This poses a threat to the economies of the trading partners, as chinese exports increase and as well as the import of the traing partnrs, with opposite results: China boosts its exports, increases steadily its trade surplus and keeps rising current account surplus. The trading economies suffer from an increasing trade deficits and reduce their current accounts. On the other hand China is placing barriers with tariffs to imports of prducts with high content of technology to defend domestic emplpyment and the industries whose size and economy of scale is not comparable to that of western countries (like in the automotive sector).
Like or Dislike:
0 
0
'This threat to the exports of china’s competitors causes a significant fall in exports, and thus a fall in GDP and aggregate demand. In times of recession, as in the US right now, this poses a great potential problem, as it could worsen the recession.'
I happen to agree here with what Palmi says here, and it seems as though (as stated in the article) protectionism is one of the only ways to protect the domestic industry, which could increase domestic employment. The employment stability could also put confidence back into the consumers to spend more money (because consumers with a stable job will tend to spend more of their income). As the article states: "It is noteworthy that President-elect Obama has actively and repeatedly supported action against 'currency manipulation.'" In addition, economists claim that the government will need to increase expenditure to get out of the recession. This money could be put towards creating more jobs, and trying to develop more efficient industries (and not on irrational bailouts, but that's not the point).
Sebastian said that: "Obama does not only fight the cheap RMB compared to the US$, but raise the prices of the imports and with that the real income of the average US citizen decreases as they mostly depend on these imports." Hopefully Sebastian, the US will become less independent if they can create efficient, long lasting, successful industries.
Does this not sound advantageous to the US?
Like or Dislike:
0 
0
I'm wondering how China, politically is able to keep the exchange rate for the RMB this low? Wouldn’t it make sense for the WTO to have done something about it by now? I realize that it is a form of protectionism, but it has drastically harmed other economies (the US) keeping the RMB this low seems unfair to me.
Like or Dislike:
0 
0
Myrthe is making a really important point, because how is China able to keep its exchange rate of the RMB so low?
It has to do with the different exchange rate systems. On the one hand, the US has a floating exchange rate, meaning that the value of the dollar is allowed to be determined solely by the demand for, and supply of, the dollar on the foreign exchange market – there is no government intervention to influence the value of the dollar.
China, othe other hand, has a managed exchange rate, meaning that China is able to regulate the RMB through government intervention. Thus China decided to lower the exchange rate of the RMB in order to make chinese goods more attractive to foreign consumers such as US consumers. Hence there is a high demand of chinese exports because as the RMB depreciates, chinese goods and services are cheaper relative to expensive American goods.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
Since the Chinese RMB is weak compared to a currency like the US dollar, it is much cheaper to produce things in China than in the US. This gives the Chinese manufacturing industries a competitive advantage over e.g. American industries.Consumers of China's largest trading partners woud rather buy cheap Chinese exports than more expensive domestic products. This of course leads to an increase in the domestic unemployment rate since domestic producers are forced to cut costs due to the weak demand for their products. The increase in unemployment wich leads to a decreases in spending in the economy combined with the increase in imports could lead to a fall in the nations aggregate demand curve causing even more unemployment and a decrease in GDP.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
By having a low vaue currency, China's goal is to increase its exports given the fact that other nations with a stronger currency would by Chinese products because they are cheaper for them to buy. An increase in exports could cause China's aggregate demand curve to shift out leading to an increase in GDP and employment and potentially to economic growth if the long run aggregate supply curve shifts out as well. China, because it has such a high population, is dependent on economic growth and thus needs to adopt methods such as keeping its currency low in order to fuel economic growth.
Like or Dislike:
0 
0
A weak RMB makes China an attractive country to trade with, particularly the production of goods, which presents competition to developing countries. By keeping the RMB low, China is able to maintain a the sector of exported manufactured production strong.
One of the protectionist measures the Obama administration could (and has) taken is putting a tariff on Chinese goods to decrease its Chinese exports and help fuel the domestic manufacturing sector. Although like we learned in the last unit, this could cause even bigger problems in terms of America's and China's GDP. Wouldn't it be in everyone's best interest that the US redirects its training to focus on the financing sector instead of setting too many protectionist regulations on Chinese exports? I thought a depreciated RMB was good for the trade agreement between the US and China..
Like or Dislike:
0 
0
This chinese idea of domestic protection is exmtreme. The United states of America is the huge china's importer, which takes over 40percentages of Whole export products. However, the major fact of increase of chinese exchage rate is the economic recession the us facing therefore, even china reduces the price of exports it wouldnt make much difference.
Like or Dislike:
0 
0
I think that China has focused on the short run and is maintaining the number of exports. I think that in the long run, however, there could be disadvantages as the importers do not have foreign producers willing to sell their goods. This is actually good for the Chinese economy as the importers are now forced to purchase local goods, providing revenue for their industries. Keeping the currency at a low value will steadily increase their growth as an economy and this is what they need to become a more developed country. This does not benefit the USA as much because the lower Chinese prices crowd out the local industries in the states.
Like or Dislike:
0 
0
Although it is in the interest of a nation to have balanced trade with other countries, this cannot be said between the US and China. This is because the exports from China to the US create a trade surplus for China. In the case of a recession the price level in the US would decrease, as the article states, which would cause a depreciation of the USD. This would mean that Chinese products would seem more expensive to US consumers thus harming the Chinese economy, because there would be less demand for Chinese goods. If there are no improvements in the US economy then the USD will depreciate decreasing imports from China to the US, in the long run this could mean a trade balance between the US and China as the demand for Chinese goods will decrease and Chinas demand for Us goods may increase.
Like or Dislike:
0 
0
Great read, you can always learn something new about forex!
Like or Dislike:
0 
0
China's apparent pegging of the USD threatnes the economies of its largest partners because it keeps demand for goods produced in China very high, which in turn affects the manufacturing sectors of other nations which cant produce and export their goods at such low costs.
China purpously does this, to maintain their manufacuring sector with high demand, and also benefiting their balance of payments greatly with billions of surplus in their current account. With that surplus of money from the current account, they can invest in american assets, and store many Dollars in its Central Bank, which decreases the amount of dollars in the market and keeps it valuable.
In Obama's case, protectionist measures such as tarrifs or quotas on Chinese exports could be placed, to decrease the high demand for those goods. This would not benefit the consumer though. An investment tax similar to what Brazil has done could be imposed, taxing Chinese investment in US assets, which could lead to China changing their USD into other currencies, to invest elsewhere. I would attempt to remove all protectionist measures, and advocate for floating excange rates, as currently, even if the USD deppreciated, and made it more expensive to buy Chinese imports, the RMB would stay practically pegged to it changing nothing.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
A given amount of foreign currency buys more Chinese goods when the RMB has devaluates. This means that Chinese goods seem cheaper. China's low currency keeps the foreign demand for it's exporting products high. It therefore has an advantage to its "largest trading partners".
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
This is benefitial for China's economy as they are keeping the aggregate demand for their products high (through the large demand of their exported goods).
They can build up a current account surplus and save this in the official reserves account or invest in foreign economies.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations?
A tarrif could be imposed on Chinese imports. This would not benefit consumers though, as they are then not profiting from the higher prices of the chinese manufactoring sector anymore.
Like or Dislike:
0 
0
China's huge size and massivley growing economy allows it to keep U.S. currency, which in turn keeps the exchange rate artificially high. Since their currency is the reciprocal of trading countries currecies, a high U.S. currency means a low Chinese currency, which keeps the demand for their exports high. Since the chinese economy is one based largley on exports, this allows for great amounts of economic growth, due to a continuously growing exports sector. If the WTO were to take no action, the US could chose to protect their domestic producers from China's actions with a tariff. This however will create dead weight loss in the economy, and will reduce the ability of the US to consume beyond its domestic production possibilities. This leads to an increase in price, which would probably worsen the economic issues the US is facing, but in the long run would force the Chinese to change their methods…
Like or Dislike:
0 
0
China's huge economy allows it to buy US Dollars and undervalue its own currency. This has massively irritated all trading partners because due to the low chinese currency, China's exports have soared, yet its imports from other nations, such as the United States of America, has decreased rapidely. The net exports minus imports of China makes up a huge part of China's GDP. By massively exporting, China has been able to increase its GDP enormously over the last few years. If the WTO take no action against China's currency policy, the US and other nations could put a tariff on Chinese goods. This would not help the consumer due to the higher prices, but it could help domestic producers due to a higher foreign price. The ideal solution would be to pressure China to stop undervaluing its currency, but that is not likely to happen because the exports make up a huge percentage of China's GDP.
Like or Dislike:
0 
0
1. By keeping its currency undervalued, Chinese-produced goods become cheaper in foreign countries, undermining these countries' manufacturing sectors.
2. China continues to hold down the value of the RMB because it does not want to give up the competitive advantage it has over most other countries due to its goods being artificially cheap.
3. If the WTO does not take action, Obama could potentially put tariffs on Chinese goods in order to reduce China's competitive advantage vs. U.S. produced goods. Inthis weak economy this could be a very bad move, because taxing a huge portion of our imports would drive up the price level, raising an already high unemployment rate.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China is continuing to undervalue its currency by using currency manipulation, a form of protectionism, where they want the RMB to weaken against the US dollar. With this policy being imposed, this has threatened the industrial economies of its largest trading partners as it has shrunk America’s manufacturing sector. With a weak RMB, this means the cost of producing products such as footballs or in this case iPods in China is lower than it would be in the U.S., keeping its export receipt high. This also allows China to be more attractive in the trading perspective. This causes a lot of damage to employment level in America or other countries. In addition, with the increasing in Chinese exports, this will cause trading partners imports to increase; causing a deficit for the trading partners as the import payments is high.
What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The purpose for maintaining the low value of the RMB is to increase exports as their currency has low exchange rate. With export increasing, it gives out a lot of benefits. The benefits for China are increasing in their employment in the export industry. Importing will be expensive, which is why currency manipulation is a form of protectionism. In addition, with the low import level, the domestic industries may benefit because now the domestic consumer will prefer to consume domestically, which leads to increase employment.
What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If the WTO does not take any action against China’s currency manipulations, Obama could impose tariffs on Chinese goods (he already did on tires) in order to protect America’s industries. However, with this move it might be dangerous and risky as this will create dead weight loss in the economy and it will affect America’s quantity of consumption as the price has increased. However the domestic producers will benefit as the competition has loosened. However, there are a lot of disadvantages that overshadows advantages. It’s not the greatest solution, but the ideal solution is the pressure China to increase the strength of its currency.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continues to keep to undervalue the currency of RMB by protectionism, e.g. keep the demand for foreign exchange high. Due to the low currency of RMB, the products produced in China would be more attractive as it has a lower price compare to foreign countries. So undervalue RMB could increase and keep exports high.
Thus, it will be threat to other countries as the more imports, the less net export they will have , resulting reduction in GDP. And many domestic job opportunities will be taken over done in the country they imported from – China, as the cost of production is cheaper and it's price attractive. This results an increase in unemployment. And this type of unemployment is likely to be long term, as there are no longer demands for those jobs as they are shifted to another country. They would need to learn news skills to get a new job, which is time consuming.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's purpose for maintaining the low value of RMB relative to the currencies of other countries is to keep up the exports. The low currency of RMB makes the exports in China price attractive, thus the orders for exports will be high. By keep exports up, the Net exports would be high as well. As a result, China's GDP will be pushed up due to high exports.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
An Obama administration may use protectionism e.g. adding tariff on Chinese goods, apply quotas, etc if the WTO refuses to take action against China's currency manipulation. I don't suggest use of protectionism because it would be better off for domestic producers as they now can produce more. But it will have negative effects such as increase in price of goods and thus worse of for consumers.
I think they could perhaps use other ways to stimulate the economy rather than use protectionism, such as change interest rates using monetary policy.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners??
China constantly undervaluing the currency, is a form of protectionism, as it keeps demand for their exports high, due to the products being produced in China being cheaper due to the devalued RMB compared to their trading partners.
Thus it threatens their trading partners because, it cause’s their partners to have more imports than exports resulting in a reduction in the GDP. This means that companies will now starts producing in China as it has a cheaper cost of production than producing in their own country, causing many domestic job opportunities in their partners countries to shift to China, causing an increase in long term unemployment in the countries that China trades with.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations??
China’s purpose of maintaining the low value of the RMB relative to the currencies of other nations is to keep up the low cost of production in China compared to competing countries, making Chinese exports more attractive, thus increasing the demand for Chinese made goods over other countries goods. As a result the GDP of china will be pushed up.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America??
The Obama administration should use protectionist policies, such as tariffs or quotas to protect domestic producers if the WTO refuses to take action.
But I would not advise Obama to use too extreme protectionist policies on China if the WTO refuses, as every protectionist policy has a backlash effect. Such as if a tariff would be introduced it would make goods in America more expensive hurting consumers, who are trying to rebuild after the recession. Another example would be if America implements a protectionist policy on China, China may feel the need to start an ‘eye for an eye’ battle in which they implement tariffs on American goods, causing both American consumers and producers to suffer. This is why I would advise Obama to talk to the Chinese on maybe trying to implement the purchasing power parity theory into their 2 economies, as it would be the best way to deal with China’s low currency value if the WTO refuses to take action.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners??
China constantly undervaluing the currency, is a form of protectionism, as it keeps demand for their exports high, due to the products being produced in China being cheaper due to the devalued RMB compared to their trading partners.
Thus it threatens their trading partners because, it cause’s their partners to have more imports than exports resulting in a reduction in the GDP. This means that companies will now starts producing in China as it has a cheaper cost of production than producing in their own country, causing many domestic job opportunities in their partners countries to shift to China, causing an increase in long term unemployment in the countries that China trades with.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations??
China’s purpose of maintaining the low value of the RMB relative to the currencies of other nations is to keep up the low cost of production in China compared to competing countries, making Chinese exports more attractive, thus increasing the demand for Chinese made goods over other countries goods. As a result the GDP of china will be pushed up.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America??
The Obama administration should use protectionist policies, such as tariffs or quotas to protect domestic producers if the WTO refuses to take action.
But I would not advise Obama to use too extreme protectionist policies on China if the WTO refuses, as every protectionist policy has a backlash effect. Such as if a tariff would be introduced it would make goods in America more expensive hurting consumers, who are trying to rebuild after the recession. Another example would be if America implements a protectionist policy on China, China may feel the need to start an ‘eye for an eye’ battle in which they implement tariffs on American goods, causing both American consumers and producers to suffer. This is why I would advise Obama to talk to the Chinese on maybe trying to implement the purchasing power parity theory into their 2 economies, as it would be the best way to deal with China’s low currency value if the WTO refuses to take action.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners??
China constantly undervaluing the currency, is a form of protectionism, as it keeps demand for their exports high, due to the products being produced in China being cheaper due to the devalued RMB compared to their trading partners.
Thus it threatens their trading partners because, it cause’s their partners to have more imports than exports resulting in a reduction in the GDP. This means that companies will now starts producing in China as it has a cheaper cost of production than producing in their own country, causing many domestic job opportunities in their partners countries to shift to China, causing an increase in long term unemployment in the countries that China trades with.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations??
China’s purpose of maintaining the low value of the RMB relative to the currencies of other nations is to keep up the low cost of production in China compared to competing countries, making Chinese exports more attractive, thus increasing the demand for Chinese made goods over other countries goods. As a result the GDP of china will be pushed up.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America??
The Obama administration should use protectionist policies, such as tariffs or quotas to protect domestic producers if the WTO refuses to take action.
But I would not advise Obama to use too extreme protectionist policies on China if the WTO refuses, as every protectionist policy has a backlash effect. Such as if a tariff would be introduced it would make goods in America more expensive hurting consumers, who are trying to rebuild after the recession. Another example would be if America implements a protectionist policy on China, China may feel the need to start an ‘eye for an eye’ battle in which they implement tariffs on American goods, causing both American consumers and producers to suffer. This is why I would advise Obama to talk to the Chinese on maybe trying to implement the purchasing power parity theory into their 2 economies, as it would be the best way to deal with China’s low currency value if the WTO refuses to take action.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China wants its currency to be weak by continuing to undervalue its RMB. This kind of policy will threat the industrial economies of its trading partners, such as US. The reason for this is that the cost of production in China will be cheaper compare to its US. Thus,consumers in US are wiling to buy products that import from China because its lower price. This will hurt US's industrial manufacturing sector, because less demand for its domestic products. In this way, China's export will be high, increasing China's AD.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's purpose for maintaining the low value of the RMB is to become “competitive currency”. The low currency of RMB makes the exports in China price attractive, because China's costs of production will be cheaper. Therefore, China will have a higher exports compare to other countries. This will benefit China's economy.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
I think Obama will use protectionism, such as tariffs to protect its economies from importing China's products. However, it will give many negative impacts to American consumers,because the prices has increase. Also, it will create dead weight loss in the economy. Hence, the disadvantages are more serious than its advantage. I do not suggest Obama use protectionism.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners??
China constantly undervaluing the currency, is a form of protectionism, as it keeps demand for their exports high, due to the products being produced in China being cheaper due to the devalued RMB compared to their trading partners.
Thus it threatens their trading partners because, it cause’s their partners to have more imports than exports resulting in a reduction in the GDP. This means that companies will now starts producing in China as it has a cheaper cost of production than producing in their own country, causing many domestic job opportunities in their partners countries to shift to China, causing an increase in long term unemployment in the countries that China trades with.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations??
China’s purpose of maintaining the low value of the RMB relative to the currencies of other nations is to keep up the low cost of production in China compared to competing countries, making Chinese exports more attractive, thus increasing the demand for Chinese made goods over other countries goods. As a result the GDP of china will be pushed up.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America??
The Obama administration should use protectionist policies, such as tariffs or quotas to protect domestic producers if the WTO refuses to take action.
But I would not advise Obama to use too extreme protectionist policies on China if the WTO refuses, as every protectionist policy has a backlash effect. Such as if a tariff would be introduced it would make goods in America more expensive hurting consumers, who are trying to rebuild after the recession. Another example would be if America implements a protectionist policy on China, China may feel the need to start an ‘eye for an eye’ battle in which they implement tariffs on American goods, causing both American consumers and producers to suffer. This is why I would advise Obama to talk to the Chinese on maybe trying to implement the purchasing power parity theory into their 2 economies, as it would be the best way to deal with China’s low currency value if the WTO refuses to take action.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continues to undervalue its currency by using “currency manipulation”, one of protectionism. That is, “keep the demand for (and the the value of) dollars high on foreign exchange markets”, which suggests that products produced in China are much cheaper and attractive than that in U.S, therefore, China export industries are constantly thriving. This directly affects U.S industries that produce the similar products. Low-valued RMB damages to U.S domestic industries in terms of unemployment, since the less products produced in U.S are consumed, the more products produced in China are consumed. Hence, the extra labor force in those industries results in high unemployment. Once China stops this policy, the threat U.S undergoes may weaken.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
Maintaining the low value of the RMB relative to the currencies of other nations bring a lot of benefits for China. First, low-valued RMB suggests that it would better export instead of import. To be specific, foreigners can use the same amount of money to purchase more Chinese products, but Chinese people will suffer from low-valued RMB if they purchase imported goods, since the purchasing power of RMB is quite low. Therefore, more export trading can bring a lot of money from other countries. Secondly, low-valued RMB is not suitable to buy a large mount of imported goods, Chinese people who used to buy imported goods may shift to buy domestically produced goods which maintain and enhance employment rate. According to Real GDP formula, AD increases overall (X increase-M decrease), so the Real GDP can increase. So China’s crucial purpose for maintaining the low value is to enhance its real GDP and increase employment rate.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Once Obama administration’s proposal is refused, Obama administration may impose tariff, quote, etc. It is not fair that U.S takes such action. Although it helps domestic producers in U.S to capture more market share, American people suffer from high price of goods and services. Other than that, the relationship between two countries is worse off. China probably implements retaliation. I suggest that Obama should use some diplomatic measure to attract and persuade China to increase its value of currency.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continuing to undervalue (underestimate the financial value) its currency by maintaining the demand for its currency high on the foreign exchange market. That is, the Chinese government wants to use weak RMB to threaten the US dollars. The weak RMB would damage the domestic industries of its trading partners, US, who has higher currency, because consumers will import more cheaper goods rather than purchasing more expensive domestic goods. Hence, the industrial economies of US will be damages in terms of lower consumption which may lead to increase of unemployment.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The most directly purpose for maintaining weak RMB relative to the currencies of other nations is to protect the domestic industries by increasing the exports while threaten the industrial economies of other nations, such as in US. That is, it's one way of protectionism. To illustrate, by lowering the countries currency, other nations will hence import more products from China since RMB is much lower than their currency. In terms of the net exports, the China's exports increase while imports decrease will then boost the value of net exports. Hence, the GDP will increase. This will thus boost the aggregate demand in China.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
In order to protect its own domestic market in US, Obama may impose tariffs or quotas hence decrease the imports from China. However, this will damage both sides. The consumers will suffer from purchasing goods with higher price and with lower amount of quantity. On the other hand, the Chinese market will also be impacted since American government imposes protectionist measure as well. This may worsen the relationship between both parties. Thus, I do not recommend Obama to impose such policy. Instead, I suggest both parties communicate with each other by such Chinese government can increase its currency.
Like or Dislike:
0 
0
1. China continuing to undervalue its currency threatens the industrial economies of its largest trading partners because China’s weak currency will lead to a high demand for Chinese exports by foreign consumers. This causes exports of China’s competitors to fall, which will lead to an increase in domestic unemployment as domestic producers are pressurized to cut costs on account of the weak demand for their products. Thus with the decrease in consumer spending and the increase in import payments, ultimately China’s competitors will experience a fall in aggregate demand. Also the trading partners will suffer from increasing trade deficits. For example, since the US is in a recession, households will not have much disposable income, so domestic consumers will have a high dependency on cheap Chinese goods but this will only worsen the recession.
2. China’s purpose of maintaining a low value of the RMB is to protect their market by decreasing its imports. Since imported goods in China will appear more expensive compared to domestic products, the domestic industries may benefit because now Chinese consumers will prefer domestically produced goods because of its low prices. Therefore unemployment decreases and so consumers with stable jobs will then be able to spend more money. The increase in consumer spending and balance of payments will lead to an increase in aggregate demand, thus possibly to economic growth.
3. A possible unilateral protectionist measure that the Obama administration could advocate is imposing tariffs on Chinese imports into the US. This would benefit the US producers since domestic consumers will have to turn to domestically produced products, however it will not benefit the domestic consumers as they were dependent on the cheap imports from China, thus this measure could worsen the economic crisis in the US. I would advise president Obama to conduct a meeting with the Chinese side and make a deal that would not stimulate any retaliation.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continuing to undervalue its currency threaten by having high currency rate on the exchange market, which is to threaten US market. If Chinese currency is low, it would damage the domestic industries and cut down in consumer spending on imported goods. Also, the United State might get damage from rise in trade deficits.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The purpose for maintaining the low value of the RMB is to protect domestic markets from increasing the exports. Due to low cost of goods in China, imported good appeared to be quite expensive, so that the Chinese would purchase goods produced within the country rather than imported good as it is cheaper than imported goods. If more people uses domestic goods produced in China, more domestic worker would be employed which will lead to economic growth in China.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Tariffs on imported good to the US. If tariffs are imposed on Chinese imported goods, there would be benefits to the producers because products imported from China is no longer cheap and consumers might have no choice but to buy domestic products. However, it is not an appropriate way as it is unfair to the consumers in the U.S.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
If China continues to undervalue its currency, it will threaten the industrial economies of its largest trading partners because it obviously will cause greater demand of exported products that is produced in China by foreign importers and customers and lower the demand for the similar exported products in nations that are involved in the same industry and have similar economy. In addition, since countries which has higher currency will suffer from high unemployment rate because transnational companies will choose to produce in China which has undervalue currency so they can minimized their cost of products. For example, US have felt threaten by the competitive currency of China in the steel industry, which has lead, US to have high rate of unemployment because they are losing the demand for local-produced steel after the customers import from China.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China’s purpose for maintaining the low value of RMB is to protect the economy. Since most of the Chinese government revenue comes from export receipt, it means that the have to attract foreign custormers, importers and investors by by setting low value of RMB, therefore the can keep the demand of exported good high and receive high government revenue.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If WTO refuses to take action against China’s currency manipulation then Obama can use protectionism like imposing tariff, quota or even embargo on the imported product, especially from China who uses currency manipulation. I think it is better for Obama to set protectionism since it will protect the jobs of many people in USA, however this is not a necessary because in there are products that are needed to produce exported goods. Both countries should make an agreement that are best for both sides economies.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
For starters, Dollar currency is the reference for all other currency around the world. The advantage will be mostly applied to the Chinese people. As they keep undervalue its currency, it will form an image of China providing resources at a very affordable price. However, towards its trading partners, it is the danger of the domestic industry. The domestic industry will plummet because of its industry importing goods from China, which is threatening towards domestic industry. For long period of time however, it will be much more disastrous; the consequences of trading partners domestic industry to be completely dead will be disastrous, because of its dependency on importing goods from China, which will create a huge unemployment issues and degrading its GDP.
What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's purpose for maintaining the low value of the RMB is in order to support the Chinese economy with exports to trading partners. by keeping the RMB low, it will provide a reassuring situation where it is affordable to purchase goods from China. And thus, it will improve China's economy as well as improving its GDP.
What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
It would be better to apply protectionist measure of subsidy as well as tariffs. subsidy is needed in order to boost the domestic industry in America, while tariffs will reduce the amount of goods that could be imported from China.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China has been undervaluing its currency that threatened US market. Low currency means it can import in cheaper price. Imports are in cheaper price therefore, China can import low materials and produce more products as cost of production is lowered. Therefore, Chinese products has lower price and better quality which attracts consumers in other countries and increases Chinese exports. Also, as Chinese currency is low, therefore, other countries has to pay higher import payment to purchase Chinese exports.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The purpose for maintaining the low value of the RMB is to produce cheaper and better produces compared to its competitors by having lower cost of production. Therefore, consumers will be attracted to Chinese products. Moreover, more businesses would manufacture products in China, which will increase domestic employment.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Protectionism method such as imposing tariffs or quota on imported goods can be good for the US. Tariffs or quota will reduce the imports and also help domestic firms to produce more. However, consumers in US might be threatened by higher price, therefore the better way is to find a point of agreement between two countries and make China to stop undervaluing its currency.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
-Policy of exchange rate manipulation in China is a weak RMB currency. This undervalues its currency threaten the industrial economies of its largest trading partners. It makes China be America’s shrinking manufacturing sector as the cost of producing goods such as ipods is far lower than in US. Thus, China’s weak and undervalued currency attract lots of America firms to produce goods in China as they can get the maximum profits due to the cheaper price for the products.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
- The China’s purpose for maintaining the low value of the RMB is mainly to prevent appreciation of its currency as well as being attractive to the large firms as a manufacturing sector. Low value of the RMB enables China to be the world’s main producers of goods; therefore, keeps the demand for dollars high on exchange rate markets and fuels the growth of the country’s exporting manufacturing sector. What it means that China will export as much as they can by lowering the value of the RMB.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
- Imposing tariffs or quota would be very beneficial to the domestic producers in U.S. As it limits the products/imported goods from the China within the specific amount, remained surplus will be filled out by the domestic American producers relatively in higher price than China’s products. Although it strongly protects the domestic firms of America, it might also be the disaster to the America’s consumers because they have to purchase goods in relatively higher price than before. Therefore, the economic activity might be lower than before. According to that, for U.S, it is better to find the mutual agreement by long discussion with China.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
By devaluing their currency China is able to attract foreign consumers with their low priced goods, therefore increasing exports, increased production and employment. The lower prices will lead to a higher demand for Chinese than for Chinas trading partners due to the higher prices. This is an serious threat because as the Chinese exports expand, the trading partners imports will increase, which can lead to a deficit.
What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
By maintaining a low value currency, China’s will be able to increase their exports as countries with a higher value currency will buy the cheap Chinese products. An increase in exports would increase China’s aggregate demand which would lead to an increase in GDP and employment. China's purpose for maintaining the low value of RMB is to increase export.
What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If the WTO refuses to take actions against Chinas currency manipulation, Obama can use tariffs or quotas on Chinese exports in order to decrease demand for Chinese products, thus protecting domestic firms. But this would not be beneficial to consumers as tariffs and quotas would increase prices, and the tariffs would create a dead weight loss in the economy. To take protectionist actions is not an ideal solution, so maybe the US and China should try to find a solution through diplomacy
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continues to undervalue its currency that will threaten the industrial economies of its largest trading partners. This happens because when RMB is weaker against US dollar, the cost of production for Ipods in China will be lower than in the US. This situation will keep China to keep their export receipts high. Also it will make China become more attractive to other countries for trading. However, this situation will give big impacts on the US employment. Many employment in US will lose their jobs because when the companies lose demand for their product, the companies will fired some employment in order to keep their cost of production low. Also US will suffer from deficit because the import payment will rise since the China's export increase.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's purpose for maintaining the low value of the RMB relative to the currencies of other nations is to increase their export receipts. The export industries can hire more employment which is good because it will reduce the number of unemployment in China. Also, the domestic industries will get more income since there will be less imports which means less foreign goods will entry China's market.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect? Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If the WTO refuses to take action against China's currency manipulations, Obama can use protectionism like impose tariffs, quota, or embargo on China's goods in order to against the currency manipulation that China does. I think Obama should impose protectionism because it could be great solution for US since it will protect the domestic industries and employments. Also it will give pressure for China to increase the value of RMB to the currencies of other nations.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continues to undervalue its currency that will threaten the industrial economies of its largest trading partners. This happens because when RMB is weaker against US dollar, the cost of production for Ipods in China will be lower than the cost of production in the US. This situation will make China become more attractive to other countries for trading and so China will keep their export receipts high. However, this situation will give big impacts on the US employments. Many employments in US will lose their jobs because when the companies lose demand for their product, the companies will fired some employment in order to keep their cost of production low. Also US will suffer from deficit because the import payment will rise since the China's export increase.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's purpose for maintaining the low value of the RMB relative to the currencies of other nations is to increase their export receipts. This will give good impacts to export industries and import industries. The export industries can hire more employment which is good because it will reduce the number of unemployment in China. Also, the domestic industries will get more income since there will be less imports which means less foreign goods will entry the China's market.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect? Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If the WTO refuses to take action against China's currency manipulations, Obama can use protectionism like impose tariffs, quota, or embargo on China's goods. I think Obama should impose protectionism because it could be great solution for US since it will protect the domestic industries and employments. Also it will give pressure for China to increase the value of RMB to the currencies of other nations.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continues to undervalue its currency threaten the industrial economies of its largest trading partners by manipulation of currency. China wants RMB to weaken against the US dollar. As this is imposed, this threatens the industrial economies of its largest trading partners. As RMB is weakened, cost of producing products in China becomes less than it does in US. And, there will be high export receipt. And, this leads China to be more attractive and causes increase in unemployment rate in US or other countries. In China, many firms from other countries will produce products in China because they can get the highest profits with cheap price for producing for products.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The purpose for maintaining the low value of RMB is to keep appreciation of Chinese currency and is to be more attractive. As mentioned in Question 1, low RMB attracts firms to produce their products in China as price for producing is cheap. This will lead increase in exports. So, by doing that, China can get much profit by lowering the value of RMB.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Tariffs or quota on imported goods will be beneficial for the US. Tariffs and quota reduces the imports as well as prevents domestic firms to produce. However, it is not good for consumers in US because consumers purchase at higher price than before. So, there might be some negative effect on US economy. So, it is better way to find a point of agreement with China.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China continuing to undervalue its currency will threatens the industrial economies of its largest trading partners because the weak currency of China will lead to greater demand of exports of Chinese products to foreign consumer. This fact will causes decrease of competitors of China that will lead to an increase in domestic unemployment as the domestic producers are cut the costs on product of the low demand for their products. Therefore, the China’s competitors will experience a fall in aggregate demand with the decrease in consumer spending and the increase in import payments, and also the trading partners will get damage cause of the trade deficits increases. For instance, in the case of US, have felt threaten by the competitive currency of China in the steel industry, which lead US to have high rate of unemployment because they are losing the demand for local-produced steel after the customers import from China.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The purpose of China’s maintaining a low value of the RMB is to protect their market by decreasing its imports, which also means protect the economy. Since the imported goods in China will be more expensive when it compare with China’s domestic products, Chinese consumers will prefer to purchase domestic products because its lower price and then, the domestic industries may benefit from it. Thus, the unemployment decreases and Chinese citizen will spend more money on it. In another word, the consumer spending, the balance of payment, and the aggregate demand will in crease and it will lead to economic growth.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Imposing tariffs or quota would be very beneficial to the domestic producers in U.S. As it limits the products and imported goods from the China within the specific amount, the remained surplus will be filled out by the domestic American producers relatively in higher price than China’s products. Although it strongly protects the domestic firms of America, it might also be the negative to the America’s consumers because they have to purchase goods in relatively higher price than before. In conclusion, the economic activity might be lower than before. According to that, it is better to find the mutual agreement by long discussion with China for U.S.
Like or Dislike:
0 
0
1) When China money value depreciates, it means their price on goods and services decrease. Thus, imports will increase because foreign countries find China products are less expensive than others. However, this will also attract imports from other country such as the U.S. This can be a threat because prices of goods and services from US are expensive since their currency is so much higher than China's. While China exports their products with low price.
2) Low value of RMB means there is a low interest rates in the country. This can avoid unemployment, increase investment, increase exports and lessen imports. However, a country always has its disadvantages of making one decision. There can't be such a perfect economy in a country.
3) Well, not having protection on China will also benefit the people in the US because imports from China are cheaper and there can be a 'healthy' trading. However, cheap products from China makes the quality and image drop because China may be using bad quality in the production of goods and services or there might be child labor which leads to less cost produciton.
Like or Dislike:
0 
0
Having a good economic trading in a country is sure hard cause we need balance. Domestic industries is one of the most important stakeholders that should be concerned about.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
When China undervalues its currency , the weak currency of China will cause a greater demand of Chinese exports in the foreign countries. This will lead to the foreign consumers to raise demand for imports from China so that aggregate demand for imports will increase and the domestic producers will be left out and this will lead the industries to lay-off workers, rising unemployment rate, as demand for their goods fall down as consumer find Chinese goods more cheaper and practical. Trading partners will suffer trade deficit as they will not balance the exports and imports.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's aim is to increase its exports as with the low currency exports will be cheaper for foreign consumer and demand for it will rise. This will be helpful for China as they will increase aggregate demand ; increasing GDP and raising employment so China's purpose is to have a greater GDP as it is a huge country for which GDP means a lot.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If WTO do not take action for this situation, US will have to protect its domestic producers and impose tariff, quota on the Chinese products. However, this case can be in favour of protecting domestic industry but it will raise the prices on the US market and may be disincentive for consumption.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
When China undervalues its currency, there will be an increase in the export amount of China. According to cost of production the China will be more preferable than US in terms of products and the other countries will have the goods of China. US will be affected in a bad way because the products of US will not be exported so in the long run this may cause high unemployment rate.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The reason why China maintained the low value of the RMB is to increase the amount of export. If China’s exports will be higher than its imports then this is a good thing for the Chinese economy. On the other hand, the more China exports the more it will produce so that there will be new job opportunities. Also because the import level lower than the exports there won’t be any harm to domestic producers.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Absolutely US should protect its domestic producers and products and this lead US to use protectionism, tariffs, quotas and subsidies to protect its domestic producers to produce more.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
When China undervalues its currency, the demand for Chinese exports in the foreign countries will raise. As the aggregate demand for imports increase, the consumption of domestic products will fall. This can lead to domestic industries to lay-off workers, and rising unemployment rate. Thus, trading partners will suffer trade deficit since the exports and imports are not in a balance.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China’s purpose is increase the exports since the low currency will make exports cheaper for foreing consumers. This will increase the GDP as the aggregate demand increases. So, the main purpose of China is increasing the GDP.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Unless WTO takes action for this situation, US will need to apply some policies in order to protect its domestic producers and as retaliation impose tariff and quota on the Chinese products. It will also increase the market price which is bad for consumers.
Like or Dislike:
0 
0
What impact does the increase in exports have on chinas GDP/ employment?
Do you think that a tariff is the only/ best solution?
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China´s undervaluation of its currency threatens the industrial economies of its largest trading partners because the weak currency causes Chinas exports to be relatively cheap for foreign consumers. As a result domestic firms cannot compete with Chinese exporters they will face a decrease in demand for their products and will have to reduce costs. In order to do so they will have to fire workers and unemployment in these countries increases. Therefore, the US and other trading partners of china will experience a fall in aggregate demand with a decrease in consumer spending and an increase in import payments. Furthermore, the trading partners trade deficits increase.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
By maintaining a low value currency, China will be able to increase their exports as countries with a higher value currency will buy the relatively cheaper Chinese products. An increase in exports would increase China’s aggregate demand which would lead to an increase in GDP and a decrease in unemployment.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If the WTO refuses to take actions against Chinas currency manipulation, Obama can use tariffs or quotas on Chinese exports in order to decrease demand for Chinese products and thus protecting domestic firms. But this would not be beneficial to consumers as tariffs and quotas would increase prices, and the tariffs would create a dead weight loss in the economy. To take protectionist actions is not an ideal solution, so maybe the US and China should try to find a solution through diplomacy.
Like or Dislike:
0 
0
1.China’s low exchange rate contributes in keeping Chinese goods and services really cheap, which will stimulate China’s export. This also causes less import of foreign goods to China. This threatens the industrial economies of China’s largest trading partners because those nations import a lot from China, but China doesn’t import their goods.
2.China’s purpose for maintaining the low value of the RMB is to prevent appreciation of its money. This will also cause China’s economic growth as exchange rate gets lower, exports increases which will affect its aggregate demand.
3.Imposing tariffs on Chinese goods or using quotas will be good protectionism methods. This method might hurt consumer surplus, but since America’s economic crisis is the major problem that President Obama has to face, I would recommend him to promote protectionist actions to protect domestic industry, which will be solution for problems like unemployment.
Like or Dislike:
0 
0
@Palmi
I agree with your idea of how cheap Chinese products attract consumers in different nations, therefore, stimulate Chinese export. I also agree with your comment on GDP and aggregate demand.
Like or Dislike:
0 
0
1. If China prevents the RMB from appreciating and keeps it relatively weak, the cost of producing goods and services in China becomes a lot cheaper than elsewhere. This means that Chinese exports are cheaper. If Chinese exports are cheaper than there major trading partners (such as the US), then they have the competitive edge over them. Countries such as the US suffer from decreasing exports, leading to unemployment and the slow economic growth of certain industries.
2. China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations is to fuel the growth of its export-manufacturing sector, further fueling high economic growth.
3. I would advise the Obama government to impose tariffs or quotas on Chinese imports. This would make the price of Chinese imports higher, thus giving domestic manufacturing industries in the US the chance to compete. This would be a great solution to protecting these domestic manufacturing industries and the employment of thousands of Americans.
Like or Dislike:
0 
0
# Suyeon So
I definitely agree with your response to the 3rd question. I think that imposing a tariff on Chinese imports is definitely the way to go as it would protect domestic industries and employment. However, these industries would have to capitalise on the protection that they are getting by increasing their efficiency and lowering their costs. This would ensure that they can remain competitive in the long-run.
Like or Dislike:
0 
0
1) How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China’s low exchanging rates makes Chinese goods and services very cheap. That situation serves the export rates of China. The adversaries of China will make less import because they will be less desirable. As a result of that the other big industries such as USA will suffer because of unemployment and trade deficit.
2)What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations is to protect the export rate. China is trying to prevent make his money appreciated, because they are trying to protect aggregate demand.
3)What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
In order to protect domestic producers, tariffs and quotas should be imposed by USA government. Even if consumer of USA will be affected in a bad way, accepting Chinese product may create bigger problems in long run.
Like or Dislike:
0 
0
Hi Dilan,
I liked your contribution. I also believe that USA should impose tariffs and quotas in order to protect domestic producers even if the consumers will be suffering because of it.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
Countries that have Industrial economies are countries that produce goods for export and therefore to make profits. This means that industrial economies can be threatened if there is another country producing the same good for a lower price. This is exactly what China is doing be devaluing the RMB. China, by not letting the RMB appreciate, is making their exports artificially cheap – so cheap that other countries producing the same good are not able to compete. Since the RMB is a very undervalued currency, goods produced in China are very cheap and therefore look very attractive to the consumer. This means that more of the Chinese exports will be purchased and fewer exports from other countries, industrial countries, will be purchased. This, therefore, decreases the revenue that industrial economies are able to generate therefore threatening the industrial economies.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
Consumers will shift their resources to the producer producing the demanded good with the least cost. Consumers aim at allocating their resources the most efficiently. By China maintaining a low value of the RMB, China is artificially making all of the goods produced and exported cheaper relative to the other international producers. China is drawing consumers in to purchase the Chinese exports in order to increase their generated revenue. Also, by maintaining the low value for the RMB, China becomes an epicenter for production because it is relatively cheap to produce their.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
A form of protection a government might employ would be a tariff against some goods produced in China in order to give domestic producers a fighting chance. This would level the playing field between the United States and China. My advisement to president Obama needs a preface. Since the United States’ economy is one based on importing, I would advise president Obama not to impose sanctions against Chinese goods. This is simply because China has bought up the American deficit and could release it if the United States was to impose sanctions. This would devalue the dollar and reduce American consumers’ purchasing power – the United States’ importing power. This devaluation of the dollar would diminish an already desperate economy.
Like or Dislike:
0 
0
@Merve:
You say that the US government should impose protectionist efforts against China? How would China react? China has a lot of American assets held up in their reserves and could release them thus devaluing the dollar if the US was to impose such protectionist efforts.
Like or Dislike:
0 
0
1.How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
As China continues to undervalue its currency, the price of Chinese good would seem cheaper in comparison with the other currencies. Thus, the demand for Chinese good would increase both in the inside and outside of the country. As the demand for Chinese goods increase, the imports from China would also get higher. This causes developing countries to have dumping. That is why; the domestic firms have difficulties to raise their profit. Besides, they may have to lay-off workers or even shut down. This would cause the domestic economies, especially in the developing countries. As the unemployment rate increases, the trade deficit would increase. That is why; since the balance of trade would be destroyed, the trading partners would have hard times to cope with the problems.
2.What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
By this way, China aims to increase the demand for its goods. As in the world market Chinese products are cheap to import, the exports of China would get higher. Thus, China would gain more profit and consequently, more jobs opportunities would be offered. This would lead an increase in the GDP, as well. As the total national output increases, the economy would grow.
3.What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
If the WTO refuses to take action against China’s currency manipulation, the US domestic product would confound with the fact that they may have to lay off workers or shut down apart from losing profit. That is why; Obama government may follow a path which would protect the domestic producers. For instance, tariffs may be imposed. However, this would restrict the US consumers as they would be charged to pay more than before. Also, this would cause deadweight loss by loss of consumer surplus. That is why; the government may find some incentives to make the domestic prices cheaper like subsidies.
Like or Dislike:
0 
0
Hi Nesibe,
I agree with your recommendation for the third question. As it is evident, the domestic firms would face with dumping and the government would need to deal with the situation. On the contrary, the consumers also should be protected in terms of high prices.
Like or Dislike:
0 
0
1)
Because of the low exchanging rates in china;Chinese goods and services very cheap. That situation serves the export rates of China. The adversaries of China will make less import because they will be less desirable. As a result of that the other big industries such as USA will suffer because of unemployment and trade deficit.
2) maintaining the low value of the RMB relative to the currencies of other nations is to protect the export rate. China is trying to prevent make his money appreciated, because they are trying to protect aggregate demand.
3)
for protecting the domestic producers, tariffs and quotas should be imposed by USA government. Even if consumer of USA will be affected in a bad way, accepting Chinese product may create bigger problems in long run.
Like or Dislike:
0 
0
1.China continues to undervalue its currency and it causes a greater demand for Chinese products and exports because it is a lot cheaper for the consumers. Thi means that in foreign countriess the aggregate demand for Chinese products will increase, and new infant industries or domestic producers will be affected badly. The demand for domestic products will fall and this will cause the industries to unemploy people because they won’t be able to pay the wages in the long term. This will lead to higher unemployement rates. This will cause the balance of trade to be destroyed and trading partners wil find it difficult to deal with it.
2.China’s purpose is to improve its exports by undervaluing the currency. Therefore it will increase the demand. The demand for the products will increase and this will help China to increase GDP, lower unemployement levels because people will have more jobs to the higher aggeragete demand for Chinese products. This will result in economic development and higher welfare due to an increase at GDP and employement levels.
Like or Dislike:
0 
0
people will have more jobs to the higher aggeragete demand for Chinese products. This will result in economic development and higher welfare due to an increase at GDP and employement levels.
3.If WTO does not take action at China’s undervaluing event, the USA economy can suffer. The domestic products may have to unemploy people, even shut down companies if China countinues to earn that much profits from international trade. This is advisable to Obama that he should take some protectionist actions. Tariffs can be imposed by Obama on those products imported. This can protect the USA economy to some level but it also affects the consumers negatively as they will be paying more and they won’t prefer it. Deadweight loss by loss of consumer surplus can occur. Other than taxes, it will be more benefical to talk about subsidies if asked to offer a solution to that problem, also not leaving the consumers affected badly.
Like or Dislike:
0 
0
Hi Gökçe, I think you should consider about subsidies in the protectionism process rather than saying that it will cause problems for the consumers in USA, the exports of CHinese products will lead to a bigger problem if the protectionsm is not applied.
Like or Dislike:
0 
0
@ James Jowett
Hi James;
I agree with your answers and I believe you did a great job answering the questions.
Like or Dislike:
0 
0
•How does China, continuing to undervalue its currency, threaten the industrial economies of its largest trading partners?
His largest trading partner is the US, the low cost exports are the main cause of threatening US industry because simply the US producers cannot fight with the Chinese low cost products by their own and this could mean several things.
Assuming that the US government doesn’t react using protectionist policies several things could happen not only to US industry but to the whole economy.
The competition could be so fierce that US consumers would fire or reduce plant size in order to compete with Chinese; this might lead to the bankrupt of the company which makes unemployment to rise. If unemployment rises there will be a decrease on spending which will cause US problems but it could also cause China problems.
•What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
By doing this its exports will be more attractive and sell better which will increase its GDP and China will continue growing as it does nowadays.
•What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
There are several possible measures that could be taken. Maybe the most effective will be a quota which will reduce the numbers of exports.
I believe the most efficient in this case and the most beneficial will be to impose tariffs on Chinese goods which will eventually help US economy. I would do this instead of increasing taxes.
Like or Dislike:
0 
0
1) As China continues to undervalue its currency, China’s largest trading partners are threatened because of this situation severely. The first basic reason is that, when China undervalue its currency, it means that the other countries value of currency will be higher than the Chinese currency, Yuan, and because of that reason these countries can import from China a lot and also manufacture their own goods in Chinese factories because of relatively low cost of production according to their own countries. This will make China’s exports rate very high and their import rate will decrease. On the other hand, if we think of the largest trading partners in the world, this situation will make their economy dominated with imports from China and export rates will decrease a lot as their currency cannot compete with China’s cheap products and manufacturing goods. This will obviously lead to unemployment to increase and domestic production to decrease in the countries who import from China because of China’s undervalued currency.
2) China’s most obvious purpose for maintain a low value of the RMB relative to the currencies of other nations is to protect its high exports rates. As they maintain a low value of RMB their price of goods become very cheap for other nations so these nations import from China which increase China’s export rates and by this high export rates China gains loads of revenues which is very good for maintaining economic activities in China for Chinese government.
3) I think if WTO refuses to take action against China’s currency manipulations, Obama administration may choose to put tariffs on Chinese goods imported from China. The reason of this protectionist policy is mainly to protect domestic producers in the USA and keep unemployment lower. Moreover, quota policy can be other option for Obama administration but I don’t think quota could overcome the demand for cheap goods in the market as the quota policy does not affect the price. So in my opinion in order to keep unemployment lower and give incentives to domestic producers to continue to produce in the market of the USA, Obama government should impose tariffs on Chinese products in the market.
Like or Dislike:
0 
0
Hi Ece,
I think you are right about the third question that imposing tariffs could affect consumers badly as the prices in the market will go up. I did not think of subsidies in my comment but I think you made a good point about that.
Like or Dislike:
0 
0
1. China’s continuation to undervalue its currency of RMB is a threat to the industrial economies of its largest trading partners (specifically the United States and the EU) as a low value of currency (depreciation) would result in Chinese exports being sold at a lower price. Therefore American and European manufacturers simply cannot compete with the low prices of Chinese exports. As it is stated in the article, exchange rate manipulation is in fact a form of protectionism, which would suggest that one party would benefit, while another suffers.
2. The main reason for China maintaining the low value of the RMB compared to currencies of other nations is to make the Chinese exports more attractive for foreign consumers. As mentioned before, the depreciation of the currency leads to a lower selling price, and therefore consumers are more likely to purchase the cheaper Chinese exports rather than their domestic products, which is more expensive. At the same time, China is also able to experience growth in their manufacturing/export sector.
3. If the WTO does not intervene in this situation/issue of exchange rate manipulation between China and the United States, the United States will most likely not have any other choice but to adopt protectionists measures themselves. Any ‘form’ of protectionism could potentially benefit and protect the producers/manufacturers in the US economy, whether it is a tariff or a quota. The United States simply need a way to restrict the significantly low priced Chinese exports in order to protect their domestic industry. However, the drawback to adopting a tariff/quota would be the increased prices for US consumers, but at a crisis that America is experiencing now, Obama should take immediate action to save its domestic industries.
Like or Dislike:
0 
0
To: Marc Lemann
Very good analysis of yours, for the second and the third question. As you said, the investment in American assets (from the surplus in their current account) would keep the US dollars at a high value, and that is in fact the main 'goal' so to speak of China into benefiting from other currencies appreciating. Also a good idea of imposing taxes on Chinese investment, never thought of that!
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
It makes their goods cheap relative to their trading partner’s goods, which raises the demand for Chinese industrial goods and lowers the demand for foreign industrial goods.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
It makes Chinese goods relatively cheap and means that it is cheaper to manufacture a goods in China.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
The Obama administration could institute economic sanctions against China. I would advise him to seek multi-lateral protection, as it would present less of a chance of retaliatory policies directed towards the US.
Like or Dislike:
0 
0
@tsekine:
I agree that it is important to protect domestic industries at a time like this, but I don’t think that this should be the focus of the President’s policy. I think they should be more concerned with promoting growth in developing industries that will be more important in the coming years than protecting industries that have already almost been out-competed.
Like or Dislike:
0 
0
-How does China, continuing to undervalue its currency, threaten the industrial economies of its largest trading partners?
Because of the value of currency of China its exports increases. As a result of this people will demand for the products of China more than the other countries because of the cost of production. This situation is not good for US because its exports will decrease.
-What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The main purpose is to increase the exports. As we learned in our lessons we can say that if the exports increase this means they have to produce more and if they have to produce more this means more people have to work. So employment rate is going to increase. Also this situation is good for the domestic producers because if the exports are higher than the imports they will not be effected by this situation.
-What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
In this situation of course US have to apply protectionism to protect its domestic producers. As a result of this situation US have to apply quotas, tariffs and subsidies. By applying these, domestic producers are been protected and they are going to produce more.
Like or Dislike:
0 
0
Thanks for the answer for the 3rd question. I didn't mntion about unemployment, price level and taxation. You gave me some new ideas…
Like or Dislike:
0 
0
1.By undervaluing its currency, Chinese goods remain relatively cheaper when compared to the goods made domestically by its competitors. This essentially raises the demand for Chinese goods from overseas. Competitors suffer because their products remain expensive as the currencies in which their products are sold continue to appreciate.
2.When China keeps the value of the RMB low relative to other currencies in the world, this essentially under-prices Chinese goods making them extremely attractive to importers in foreign countries. This stifles away demand from domestic producers in these other countries.
Like or Dislike:
0 
0
3.Because the US demands so heavily on Chinese exports, the Obama administration should 'tread lightly' so-to-speak when it comes to taking action against them. In order to defer demand for its government bonds, the US could dramatically cut interest rates therefore reducing the demand for the US dollar. This would be a non-protectionist response to the problem. If the US wishes to annoy the Chinese for their actions in currency manipulation, they could impose trade barriers such as import quotas or tariffs on goods that come primarily from China. Personally I think it is not in China's favour to continue to harm US manufacturers as most of the demand for Chinese products come from the US. If Americans don't have jobs how will they be able to purchase goods from China. This also harms the citizens of China as their wages don't have the appropriate purchasing power overseas as the currency market would determine.
Like or Dislike:
0 
0
@Do?an Can
I agree that the US should attempt to find a solution to the problem of currency manipulation as this is not sustainable in the long run. However I think the US shoul be careful when it decides to make enimies of trading partners, especially ones as strong as China. The US should only resort to protectionism if efforts to convince the Chinese of their malpractices has failed. If the US wishes to make a strong point, it should unite with other countries suffering from Chinese currency manipulation.
Like or Dislike:
0 
0
1. How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
By undervaluing their own currency, China is using almost a form of protectionism. They are artificially making their own goods look more attractive compared to their trading partner's industries. This means that they are able to export more, driving their domestic economy forward.
2. What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China's purpose for keeping the value of the RMB low is to keep costs of production in China low, allowing their manufacturing industries to flourish.
3. What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
I would advise against the Obama administration using protectionist measures if the WTO refuses. This would not only create more tension with China as a trading partner in the long term, but it would also end up hurting the US consumers with higher prices(from the loss of welfare, etc.).
Like or Dislike:
0 
0
@Elvira I agree with your answer to the last post to a certain degree. I don't think that it would be a good idea at all for the US to use protectionism against China, as it would lead to greater costs, etc in the US. I think a diplomatic measure, as you said, is the best option.
Like or Dislike:
0 
0
1.) How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
The low currency value will definitely result with a fall in the prices of Chinese exports. These low prices of the Chinese exports are in fact not something good especially for the EU and USA economies, since they cannot compete with those low prices of Chinese exports. So by this way, China threatens the industrial economies of its largest trading partners like European countries and United States.
2.) What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
By maintaining the low value of RMB relative to the currencies of other nations, China would be in a position that its exports would be chosen more, since the demand towards to those products has been increased. Thus, Chinese high export rates will be protected too.
3.) What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
In this case, what America and so the Obama administration should do is to apply protectionism whether quota or tariffs to protect its own domestic markets. Since US consumers are chosing low-priced products which are the exports of China, domestic markets is being affected badly as they are not preferred because of their values. So that to protect them, some protectionism principles should be used.
Like or Dislike:
0 
0
Hi Merve, I really liked your answers. They are informative and so clear.
Like or Dislike:
0 
0
How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
China's currency manipulation is protectionism because it gives the Chinese market an unfair advantage over its trading partners' economies. The advantage costs the partners GDP as firms export labor to the cheaper market in China. The export of labor results in an increase in unemployment for the effected nation causing further problems in the domestic economy.
What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
China has a larger advantage because the goods can be produced cheaper. If the exchange rate were 1:1 then it may cost 5 dollars to manufacture a good; however, if the exchange rate is lower, it may only cost 3 dollars. The same good produced in Australia would cost 5 dollars.
What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations?
Obama could implement counter-protectionism such as tariffs or quotas to limit the trade. The limit on the trade would compensate for the trade lost to the protective advantage china gathered through currency manipulation.
How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
I would advice minimal protectionist policies because of the possibility of retaliation. Retaliation may cause devaluation of the dollar or further devaluing of the RMP causing the protectionism to be useless, Policies on behalf of the US will increase the price of goods for consumers limiting domestic spending and further lowering the GDP. Strong policies would not aid either country.
Like or Dislike:
0 
0
1.The manufacturing sectors of China's trade partners suffer severely as they cannot compete with the low cost production of China due to the undervalued RMB. This leads to an increase in unemployment rate and recession.
2. China aims to aggrandize its export sector by keeping RMB low because low Chinese exports will be much more attractive than the US or European products. This will lead to economic growth for China.
3. If the WTO does not act against China, then the US will have to use protectionist measures on his own to increase economic activity and reduce the unemployment rate. Firstly, the US may use quotas or tariffs to reduce the Chinese exports in the country. Besides, the government may subsidize the manufacturing sector to become more competitive against Chinese exports. Lastly, The government may depreciate the US dollar to make US exports more attractive. This option seems unlikely as China has an incessant demand for US treasury securities and other financial and real assets to keep dollar high.
Like or Dislike:
0 
0
Insanely consuming American nation would never be glad to hear that the prices will increase due to the tariff imposed by Obama.
Like or Dislike:
0 
0
1.) How does China continuing to undervalue its currency threaten the industrial economies of its largest trading partners?
To keep the currencies undervalued, the prices of the Chinese goods become cheaper in foreign countries. This means that they are able to export more compare to other countries, and their domestic economy will be developed.
2.) What is China’s purpose for maintaining the low value of the RMB relative to the currencies of other nations?
The main purpose of Chine for keeping the value of the RMB low is to keep the cost of production lower. So that the products are cheaper and as a result of high exports, the domestic manufacturing industries develop.
3.) What would be a unilateral protectionist measure an Obama administration may advocate if the WTO refuses to take action against China’s currency manipulations? How would you advise president-elect Obama on the issue of whether to take protectionist action against China in the context of the current economic crisis in America?
Obama could put some tarrifs on Chinese goods in order to decrease the China’s comp. advantage, if the world trade organization doesn’t take action. Since the US consumers are choosing the lower priced products which are mostly the exports of China, the domestic firms are affected in a negative way. So, in order to protect them some protectionist actions can be taken.
Like or Dislike:
0 
0
[...] Exchange rates, currency manipulations, and the balance of trade [...]
Like or Dislike:
0 
0