Disadvantage of increase Chinese Exchange for China - International Trade
Why USA want to increase Chinese Exchange Rate
As we all know, China is a big processing and export country, we can see many products all be made in China. Therefore, when the Chinese exchange rate increased, the demand of Chinese product for American companies and residents will be reduced, because the Chinese exchange rate increase, the cost of Chinese products will be increased at the same time, so they have to expend more dollars for Chinese products. The competition of Chinese products will be decreased in American market.
For example, the price of one Chinese phone is 100 ...view middle of the document...
Because the increasing of Chinese exchange rate will reduce the price of products of import, in other words, duo to Chinese exchange increasing, so the RMB will become more valuable. Especially, the price of some raw material and advanced equipment will be reduced from other countries, so some Chinese companies can introduce new technology at a lower cost. According to researched, when Chinese exchange rate increased from 6.8280 to 6.7750 between May, 2011 and July 2011, the amount of imports increased from 1122.1 billion to 1168.0 billion.
Disadvantage of increase Chinese Exchange for China
With the higher import and lower export, the employment question in China will become more grave. Because the Chinese exchange increase, Chinese Economise Growth tendency will become slow, and labour market excess supply cause the increase of competition of job and the reduce of employment rate.
What happen if China lost control for the increase of exchange
Japan can be a good example. Now, Chinese status is similar with Japan in about early 80’s, because they are the biggest creditor countries for USA. Duo to the...