A very important global issue and one that is also a political issue this election season is the value of the Chinese currency. Should China be pressured or forced to raise the value of its currency? If not why not but if so then how?
In recent years, global trade has been rendered subject to many currency factors that exist around the globe. The effectiveness of global trade is, therefore, significant whereby currency valuation by one country can be equally compared to that of the other (Hassan, Mertens, & Zhang, 2016). Recently, China’s currency manipulation (by deflating or inflating exchange rates) to push the currency equilibrium away has been the talk of the town raising mixed reactions among the politicians and statesmen.
Therefore, it is essential to force China to raise the value of its currency since it has drastically affected global trade. This act by the Chinese to devalue their currency has been attributed to a scope of motives by the Chinese government. Its devaluation makes its exports cheaper and more competitive in global trade, and the imports into their country become more expensive than their locally manufactured goods. Therefore, considering the United States to be the “consumer of the last resort,” the domestic products (US’s) become more expensive than the imports from China. This declares a threat to the local manufacturing units.
Chinese currency manipulation has posed adverse effects on the United States. It is currently held responsible for the loss of millions of jobs in the United States and Europe due to the fall in the domestic industries. Scholars have argued that due to the lack of multilateral resolutions to counter China’s Currency manipulation, United States should individually or unilaterally push china to raise its value. From this view, it is evident that Chinese currency manipulation requires immediate mitigation.
The intentions to regulate Chinese currency manipulation can be achieved by implementing the proposed Trans-Pacific Partnership currency chapter in accordance to the International Monetary Fund guidelines, by buying sizeable long-term scale foreign Assets to block the exchange rate Appreciation by suppressing the Chinese currency value and imposing regulations by global countries to curb excessive imports from china.
In conclusion, the IMF failure to monitor china and the collapse of multilateral solutions to Chinese currency manipulation will exactly lead to retaliation of other member country members of the globe with unilateral measures.
In my opinion, China should be pressured to raise the value of its currency. Since the start of the trade war between US and China, the yuan has hit it’s lowest levels since 2008. The impact of the weaker yuan is to make Chinese exports more competitive and cheaper to purchase with other currencies. This way, although the US is imposing higher tariffs, China is still able to do business with other countries. China is also taking a back seat with this policy because also creates imports into China more expensive. The government has complete control of the yuan and is not freely traded so movements against the US dollar is limited. Due to this situation, US President Trump has known to have accused China of devaluing and manipulating its currency to support it’s exports, all of which China has denied any engagement in competitive devaluations data could suggests otherwise. Artificially inflating or deflating currencies is known to be very controversial and disregards trading rules by doing so and is creating unfair competitive advantages. This can seriously affect its global markets because it can significantly impact job losses in the US and in Europe. It is predicted by analysts that the yuan will weaken further into the future.
Manipulation of the yuan or any currency from a country could affect other countries and the global market as a whole. Since China is also a powerful country and their business relations, it can unfairly the world economy as well. Any country engaging in this act is too powerful, contrary to what most are saying, I feel that no country should have this much influence on the world economy.
The issue is that China changes the value of the Yuan daily and keeps it low to ensure a strong demand for Chinese products and production. This is something we see often and people joke that everything is made in China because it’s just so cheap to import. Many believe that if China allowed the market to fluctuate according to demand, that the Yuan would be much higher and there wouldn’t be the trade deficits we see today. Which by the way was at a $419.2 billion deficit in 2018 and has since taken a dive down to $345.6 billion since the tariffs and trade war began according to The USTR.
Now, as for if China should be forced to increase it’s currency, I do not believe so. I think there needs to be a balance of trade and the people we elect can discuss those things. We have seen the POTUS claim that he argued a great deal for the U.S and hopefully we will see the fruits of that soon. But if one country can produce things at a better rate, then it’s something which should stay because there’s a reason for the high demand and it’s more than people being cheap. Also, the cost will also come back to us at the bottom, it always seems to find us at the end.