Total 2009 exports were more than $1.2 trillion, China's customs agency said Sunday. That was ahead of the 816 billion euros ($1.17 trillion) forecast for Germany by its foreign trade organization, BGA.The article states that many countries believe that China is intentionally keeping the value of its currency low so that its exports appear more attractive in foreign markets. This is a pretty interesting concept and I would be curious to learn how this strategy affects the Chinese economy as a whole. I also have to wonder about the individuals in China. How does this affect the factory workers? The middle class? As workers? As consumers? I'm not going to pretend that I am anywhere near knowledgeable enough to even begin to answer these questions, but they certainly came immediately to my mind when reading the article.
Also see this article at The Economist
I would find it to be very selfish of China to keep the value of their currency low only for the sake of making their exports look good. Yes, it would prove to be good for the Chinese trade market, but I can't imagine that keeping the value of their money low helps the domestic economy at all.
ReplyDeleteI'm not suprised that China is the biggest exporter. It is the most populated country. I wonder if they are one of the biggest importers. What are their comparitive costs for making so many exports?
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I think China takes the advantage of exportation generally because it has enough cheap labor force. Also with the large population to feed, it's unwise to set the currency value too high or it can't attract enough invenstment to provide enough jobs for so many people. Some investors choose Chinese market just because the cost is little and they can make profit from it. This kind of voluntary exchange makes both sides better off. By the way, I think China may face the risk of foam economy if it raises the value of currency too fast.
ReplyDeleteI think keeping the currency artificially low does have consequences. For the upper and middle classes, it makes traveling, except to even poorer countries, very expensive, limiting the Chinese people's access to the world. It is especially hard on the working class. Before the economic crisis this policy meant that China was internationally devaluing its work force as inflation slowed or reversed. Sure this brought jobs, but it didn't bring job improvement, as the factory workers work was seen as even cheaper to the exporters. With the current economy, China's deflation control could now be seen as inflation control, but even with that fact, with more Americans holding back their spending on many of the goods China produces, the country might take a hit, or might wind up treating its people worse in order to make even cheaper objects.
ReplyDeleteI don't think anyone should be too surprised that they are the biggest exporter. It's similar to why Wal-Mart is so high above its competition- they both treat their employees like garbage. Because China has such cheap workers, they are able to sell their products cheaper yet make a much larger profit. It's a win-win if we don't look in the sweat shops.
ReplyDeleteThe assumption that China would devalue its currency is thought provoking. I agree with Wei Wei's opinion on the issue but it prompts me to think of another possible reason as to why China would devalue its currency. How many products and services does China import from other countries? I know that this is called international trade but with China producing so many products do they honestly import much? I assume not. With China not having a real need to import lots of products from other countries, they also have no real need to have a competitive foreign currency to purchase these goods and services. This goes back to our discussion today: sometimes decisions made by govt doesnt improve the lives of its citizens but the economy as whole.
ReplyDeleteI have to say something as a Chinese...I prefer they set the currency higher...because for my parents, they will be so glad that we can spend less money to go to college here...but this kind of idea is only for the individuals, and also, i want to answer you questions in some way. I am from middle class of China, my dad is an engineer and my mom is an accountant...I admit that they didn't get that high wage comparing with the people in U.S. , but the consumption(did I use the right word?) in China is different from here too...for example, someone from U.S. earns $5,600 per month, and they need to shop for the food for $100 per week, in China, people earns $800 per month, but the food for a week is about $30...hope those numbers could help you understand what I tried to explain...
ReplyDeleteAs the whole country,also as a developing country, we have such a huge population, if we change our currency in a short time period, could you image about the problem of unemployment in a developing country?
(actually I knew the currency for dollar and RMB pretty well, because it is really related to my life, from my experience, the RMB currency is getting higher but just change a little bit once a time.)
Thinking as individuals who live in U.S., if China change the currency, you probably will not be able to buy something cheaper and nicer, it maybe won't affect the middle class that much...but what about the low-income class?
The developed countries want China to higher the currency because they really affected by the unfaired trade...people lost their jobs...and the factory have to face to the lower price compititions...
To me, it's really hard to say who is selfish or something like that...
but I believe that if China higher RMB currency in a short time period, that would just cause more problems...E
It is no surprise to me that the China is talking over the market and we can simply prove that with the exercise that we had in class today. Most of everyone’s clothing today was from China which meant that all those products were imported into the United States. Although more people got employed to manufacture all that clothing it was probably at a lower than minimum wage. E,A
ReplyDeleteI'm not sure that it is really a bad thing that the Chinese have a low value currency and pay their workers less. They may have a lower standard of living, but their country is obviously much more productive than our own. I believe that it is also true that goods are much cheaper on average in China, probably because they make so many products. If workers in the United States would accept less pay then we too would be able to produce things cheaply and export more goods. Ultimately it seems like there is a trade off. Either people are paid more on average and their country must import products that are made more inexpensively elsewhere or people are paid less and are able to create cheaper goods which compete in world markets. In order to keep the high standard of living we enjoy in America we cannot afford to live only on what we produce.I am not entirely sure if my opinion is correct or not, I'm just trying to explain how I view the situation. A, E
ReplyDeleteI was just reading something that compared modern day China to the US after WWII. Their argument was that, during the war, Americans were working harder than ever but did not receive any direct economic benefit from their labor, much like the Chinese labor force today. As with America towards the end of the war when the economy was boosted, there is fear of what will happen when the economy shifted.
ReplyDeleteAlthough America was able to redirect the labor forces to civilian purposes and we went through a period of economic upsurge, it's difficult to say what could happen in China.
And if it did work, and China is able to benefit from the change, the roles between the U.S. and China could easily be switched since we are the primary profiters from China's exports.
For us as Americans, it would mean more work and less play.
I was really intrigued by Yuanyaun's comment. It is always such a hard game to play in this global market to make decisions, since they will inevitably negatively affect someone. I think that it is hard for us in the US to grasp how greatly the markets affect a nation, because for as long as most of us have lived we have been the major player and have had the better hand. This past year has revealed to many Americans how unstable our economy can really be. I know China has seen many economic changes over the course of the last century and that they understand more fully the trade offs that come with a change in economic policy. Furthermore, because their governing system is different it is easier for the government to make changes in policy without agreement from the mass public. In America because everyone has a say in government it is a lot harder to come to a change, because so much discussion must happen before hand.
ReplyDeleteGoing off of Preston's comment..." Either people are paid more on average and their country must import products that are made more inexpensively elsewhere or people are paid less and are able to create cheaper goods which compete in world markets."
ReplyDeleteKeeping the currency low is something that China does to support it's economy, but isn't the goal of a good economy to support the people? China certainly doesn't have a good record on treating people right (human rights, anyone?). The cheap labor and low currency seem backwards to me. A, E