Chinese Currency Manipulation

Question

Manufacturers in the US want China to increase the value of the yuan. They say China undervalues their currency making their products cheap, thus undercutting American business. Some believe that this is why Americans are losing jobs. Wal-Mart and other companies believe it is a good thing because it keeps prices low for the products they sells. 
Answer the following questions below:
Discuss whether low yuan value is good for the US because of low prices or if it is costing too many Americans their jobs. You will want to do some research on the subject of currency manipulation for additional information to debate this topic.
Supplemental Resources:

Use these sites to help augment any research you may need for this week’s subjects. It may be helpful to add a bookmark for each site in your internet browser.
•International Trade Administration
•The Brookings Institution
•The Economist- Economics
•Forbes- Economics & Finance
•Investopedia
•Bloomberg View- Economics
•The White House Administration, Council of Economic Advisors
•World Economic Forum
•The Heritage Foundation

Readings and Resources 
.
eBook:

OpenStax College. (2014). Principles of Microeconomics. Rice University.- this ebook is available in print, pdf, web view, and bookshare versions from the OpenStax College site. The assigned readings for this unit are linked below to the web view version for your convenience.
•Chapter 19: http://cnx.org/contents/QGHIMgmO@11.11:55HqjBpe@4/Introduction-to-Macroeconomic-
•Chapter 20: http://cnx.org/contents/QGHIMgmO@11.11:TcqgYaWh@5/Introduction-to-International-

Articles, Websites, and Videos:

A detailed exploration of deregulation and protectionism in global markets.
•Shah, A. (2010, January 17). Deregulation or protectionism? [online]. Global Issues: Social , Political, Economic and Environmental Issues that Affect Us All.

Here’s a wonderful article as well as additional resources regarding international trade.
•Kling, A. International trade. In The Concise Encyclopedia of Economics (2nd ed.) [online]. The Library of Economics and Liberty.

Use these sites to augment this week’s assignment.
•World Trade Organization
•United States Department of Economics, Bureau of Economic Analysis


Use Economic Terms in the paper.

Answer

Chinese Currency Manipulation

            Chinese currency manipulation affects both the country’s economy and that of the United States. The devaluation of Yuan undercuts American businesses, thus leading to loss of jobs. At the same time, it has been used as a tool for reviving the Chinese export industry. Recently, the Chinese central bank implemented an adjustment of the everyday trading band for the Yuan in relation to the dollar. This had the effect of allowing the Yuan to fluctuate by two percent above or below the rate that has been fixed by the People’s Bank of China.

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            When looked at from an analytical point of view, China’s devaluation of its currency is aimed at boosting its economy. In most instances, China devalues the Yuan so that the market forces can have a control of the exchange rate of the currency. While the devaluation favors China, other countries that are involved in trade partnerships with China suffer (Menton, 2015). The devaluation, for example, hurts the United States in terms of business. Chinese exporters gain an advantage over other trading partners such as the United States in terms of the prices of the goods and services. It becomes cheap for the Chinese to export their goods and services to the United States market, but expensive for US investors to export theirs to China. Besides, the devaluation of the Yuan locks out foreign investors from accessing the Chinese stock market.

            One of the outcomes of this move is that the economic fortunes of China have acquired a major boost. The United States, on the other hand, has been exposed to the possibility of job cuts, especially in their manufacturing industry. The costs of dollar-denominated imports are being raised by the devaluation. A major problem may arise in international trade if this tendency to devaluate currencies is adopted by many countries across the world (Stewart, 2015). For fairness to prevail ininternational business, it is important that China prices its Yuan objectively.

References

Menton, J. (2015). 4 Ways China’s Devalued Yuan Could Hurt The US Economy. International Business Times. Retrieved from http://www.ibtimes.com/4-ways-chinas-devalued-yuan-could-hurt-us-economy-2049204

Stewart, H. (16 August, 2015). Eight reasons why China’s currency crisis matters to us all. The Guardian. Retrieved from https://www.theguardian.com/world/2015/aug/16/china-currency-crisis-yuan-devaluation-why-it-matters