International Business Essay - 812 words

International Business 1. Chinese Currency Many experts have wondered and spent much time thinking on how the Chinese might dump their dollar currency peg, yet almost nothing is known about official Chinese thinking on these issues. There are plenty of people who pretend they know, but most of them have already been challenged too often already to have any faith in their believed knowledge of the plotting of Chinese economic policy. The Chinese seem determined to stick to the national characteristic of mystery. Whatever the Chinese do, don't expect fireworks. China is adopting the traditional route to development which will rely on thriving export performance. Domestic demand can come later.


China won't risk damaging these exports by allowing its currency to float freely, for the following appreciation would be large. If the Chinese currency was floated it will rise strongly against the dollar until the trade imbalance is corrected. With America's trade deficit swelling, the renminbi peg is a growing source of complaint among US policymakers. China's reserves of foreign currency - $346.5bn of them at the last count - are in any case large enough to guarantee a long period of deficits, and its success in marketing the country as "factory to the world" will make sure a continued strong inflow of foreign investment into the indefinite future. Critics blame China's currency system for contributing to the loss of 3 million U.S. manufacturing jobs over the past five years. They also blame China's system for a soaring trade deficit that hit a record $617 billion (euro491.59 billion) last year, including a $162 billion (euro129 billion) imbalance just with China, the largest ever with a single country.


The administration, which at the start argued that China should allow its currency to float freely with its value set by global currency markets, now challenges that such a move would be too troublesome in the near term. It argues that a temporary step should be taken. While the administration has not specified what that step would be currency experts say China could link the yuan's value to a group of currencies from other countries, not just the dollar, or it could create a band within which the currency could trade. 2. Global Products and Companies In recent years China has replaced Japan as the country with which the US has its biggest trade imbalance. The shortfall is already massive and it seems to grow bigger by the day. While Chinese imports have been largely tracking the ...................................................................................................................................................................................................................................................................................................................................................................

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Essay Tags: international business, currency, china, globalization, chinese currency

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