Assignment Writing Help on Currency Manipulation

Currency Manipulation

Do you think that China is Manipulating its Currency? 

In my view, china is manipulating its currency by devaluating the states currency that is the Yuan. The devaluation of the Yuan boosts the country’s exports. The Chinese products are thus as a consequence cheaper in dollar. China constantly prints new money, which it uses to purchase the U.S Dollars. This money is also used to purchase the U.S government debt making the market to be flooded with Chinese Yuan (Killingsworth, 2014). The demand for the American dollar consequently increases. The major aim of the Yuan manipulation is to promote export and economic growth. China also attains this by pegging their currency against the dollar.

What does this mean to the U.S. Economy?

The China’s currency manipulation hurts the United States economy since it creates wider trade deficit. The trade deficit has the effect of degrading the dollar value. The manipulation of Yuen by the Chinese government also cost the United States approximately 5.8 million jobs (McCauley, McGuire, & Sushko, 2015).

Should the United States attempt to force China to change its Policy?

The Chinese has managed to make their exports more attractive due to the devaluation of Yuan and thus, the United States exports become less competitive since the value of Dollar is strong. The demand for the dollar declines. It is for this reason that the United States government should compel China to change its currency manipulation policy.

Critique to my Classmate Thoughts

The Chinese products are cheaper in the global economy due to the undervaluation of the Yuan. I agree with my classmate’s line of thoughts that the Chinese government needs to refrain from manipulating the exchange rates since this may lead to instability in the global exchange rate (McKinnon & Schnabl, 2014). The exchange rate for any currency is determined by the amount of exports against the country’s imports. The United States government on the other hand has devised strategies of forcing the Chinese government to abandon the currency manipulation policy, which includes trade barriers.

References

Killingsworth, W. (2014). Saving American Manufacturing: The Fight for Jobs, Opportunity, and National Security. Business Expert Press.

McCauley, R., McGuire, P., & Sushko, V. (2015). Global Dollar Credit: Links to Us Monetary Policy and Leverage. Basel: Bank for International Settlements, Monetary and Economic Dept.

McKinnon, R., & Schnabl, G. (2014). China’s Exchange Rate and Financial Repression: the Conflicted Emergence of the Renminbi As an International Currency. München: CESifo, Center for Economic Studies & Ifo Institute for economic research.