The Currency War between China and the United States
An analysis of the effects of currency wars between the Chinese yuan and the US dollar and its impact on business in the two countries.
# 153519 | 2,724 words | 7 sources | APA | 2013 |
Published on Jun 09, 2013 in Business (Finance, Investment and Banking) , Business (International) , Business (Management)
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The paper explains that rivalry between the dollar and the Yuan in the world market stems from the perception that continued economic growth of China occurs at the expense of the economy of the United States. The paper discusses the effects of the currency war and relates that it hurts exports and causes disproportionate capital inflows, loss of competitive advantage, unemployment, and damage to the manufacturing industry. The paper then discusses the responses to the currency war that involve unilateral action, bond purchasing, stimulation of domestic economies as well as the building of dollar reserves. The paper argues that there is a need for management teams in the two countries to institute strategies such as a reduction of production costs, targeting of emerging markets and diversification, in order to effectively address challenges associated with poor currency relations.
From the Paper:"Currency rivalry between the Yuan and the dollar supersede the trade wars that have pervaded United States and China on taxes and tariffs. In the recent past China has made significant progress towards strategic positioning through increased access of the international markets and through the attainment of the World Trade Organization membership. This has enhanced the ability of the country to penetrate world markets and expand market presence for Chinese products. Most notable is the ability of China to exploit the system of semi free trade where world nations float their exchange rates rather than rigidly control them. The country has therefore put strong measures in place which ensure heavy control and manipulation of the Yuan exchange rates unlike the other trading powers (Whitney, 2010).
"In effect, the Yuan remains considerably weak over the United States dollar. This is due to the fact that the dollar value is determined by the normal exchange rates and trade forces while the Yuan is rigidly controlled and manipulated by the Chinese government to maintain its value (Subramanian, 2010). Consequently, China is able to offer exports to the world a market at a lower price in comparison to the US acquiring what America perceives as an unfair market advantage. This leads to intensive campaigns by the United States government to have Beijing drop its exchange rate manipulation strategies (McIntyre, 2010)."
Sample of Sources Used:
- Akita, S., & White, N. J. (2010). The International Order of Asia in the 1930s and 1950s. Delhi: Ashgate Publishing, Ltd.
- Ji, Z. (2003). A history of modern Shanghai banking. New York: M.E. Sharpe.
- McIntyre, D. A. (2010). US Currency Wars With China Looms. Retrieved May 19, 2011, from http://247wallst.com/2010/03/21/us-currency-wars-with-china-looms/
- Subramanian, A. (2010, October 20). America cannot win the currency wars alone. Financial Times .
- Whitney, M. (2010). U.S. China Currency War Drifting towards Military Conflict. Retrieved May 19, 2011, from http://www.marketoracle.co.uk/Article23687.html
Cite this Analytical Essay:
The Currency War between China and the United States (2013, June 09) Retrieved December 10, 2023, from https://www.academon.com/analytical-essay/the-currency-war-between-china-and-the-united-states-153519/
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