Title: Chinese Currency Manipulation - Economics Help
Headings: Chinese Currency Manipulation
Chinese Currency Manipulation
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Content: This policy of buying foreign assets has led China to accumulate $2.4 trillion of foreign currency reserves. ( China’s Foreign Currency Reserves)
Why is China Pursuing this Policy? China is pursuing a policy of reducing the value of its currency to try and boost growth, especially in its key exporting industries. Chinese growth is very high by western standards. However, China needs a high rate of growth to absorb labour that is made unemployed from the agricultural sector. Because China doesn’t have much in the way of social welfare payments, it is concerned that without job creation in the manufacturing sector they could face high unemployment and social unrest. Therefore, keeping a weak currency helps to boost demand for Chinese exports and therefore Chinese jobs. Why is US Unhappy at Situation? By keeping the dollar strong, US exports become less competitive. Also by keeping the dollar strong to the Chinese Yuan, it makes Chinese imports relatively more attractive, increasing foreign demand at the expense of domestic producers.