To be, or not to be, that's a question!

( The topic of Openness)

Accord to these two articles, we may grab depth-analysis base on the trade between the U.S and China. Plausibly, Chinese authority insists on suppressing the worth of its currency with turning a deaf ear to other countries’ evaluations headed by the U.S.

   In this Wednesday, House of Representatives of the U.S had approved a motion that the U.S would punish those countries if they are going to underestimate the value of their currencies. The congressman and businessman repudiated the Chinese authorities manipulate the RMB exchange rate in order to plummet the price of Chinese exported products. As they said, this solution would trigger millions of unemployment within the U.S horribly. President Obama also referred this issue during he was visiting lowa, he said he had already urged China to implement their exchange rate appreciation. Because the underestimated value of Chinese currency had caused the terrible trade deficit reached 145 billion approximately.

This motion empowered U.S Commerce Depart to tax some imported product from those countries whose currencies are over underestimated. The C.E.O of IMF Mr. Kahn also complied with this motion. Actually, President Obama had ever contact the Chinese premier Wen Jiabao, but they hadn’t reached any agreements after engaged a long dialogue. However, President Obama didn’t know Chinese authority is the best player of delaying time. I could understand President Obama might ever feel torturous and agonizing in this meeting. However, the senior consultant of White House named James Bader stated, this was a genuine conversation.

We realized the situation as to the Chinese authority subdues the exchange rate appreciation of Chinese currency while the U.S Commerce Department imposes the high tariff on the exported products from China gradually, but not many of us didn’t postulate the root attributes of this worsening problem. We would be curious why the Chinese authority prefer to encounter that revolt and rebuke but not to make its exchange rate appreciation happened. In my point of view, if the Chinese authority is going to emancipate its exchange rate regime, it would strike its exported companies, thus, the trade surpass would shorten, so the inflows from foreign would be decreased too. More outstandingly, the Chinese authority is creating those regimes of social medical insurance, minimum wages system to its citizens, which would add up the cost for every company. China could still spend that money on infrastructure because it has potent foreign exchange reserve, also, it has domestic high saving ratio. Once the exchange rate appreciation incur, those money of foreign exchange reserve would

depreciate, also, its immanent saving would blow out to the foreign countries, because people have more money to spend abroad. Most outstandingly, the exchange rate appreciation would incur the loss of trade. That’s why the China authority would not take the risk of appreciating its exchange rate. China didn’t want to throw the good money after bad.

However, the Chinese authority shouldn’t only consider the benefit of itself. It should more consider about the internal inflation, the relationship and employment rate of U.S. Tariff punishment is just phenomenon, but its depth reason should be exchange rate appreciation by China. Eventually, I state, I support the exchange rate appreciation promptly. However, I am worrying about what the founder of Kynikos Associates (Hedge Fund) said, if the real estate bubbles is cracking, the Chinese economies would be crumple. At that point, the terrible Chinese exchange rate deprecation would be substantiated.

To be, or not to be, that’s a question!

                                                              Reference

Barr, C. (2010). Why China doesn't ask how high when we say jump. Retrieved   from

http://finance.fortune.cnn.com/2010/10/20/why-china-doesnt-ask-how-    high-when-we-say-jump/

Beastly Terrorism Impact on Trade

Terrorism would be a really tough treat to every nation; the national economics would be obstructive by terrorism. We should notice that they are risky to many industries. On behalf on financial trade, terrorism would also hound the business and made the foreign investors quit the stake, for example, One such example of this phenomenon is the resulting collapse of small or floundering airlines after the September 11th attacks on Americans in 2001.Fear can make the stock holder sell their stocks irrationally and cause the turbid situation to the capital market. On behalf of good trades,  there’s a famous pirate called Somali who always attempt to raid and robbed the commercial fleet. Let's say China could produce lots of products domestically,but it still need to import some high technological products from the U.S. Those terrorist would like to bring disease to the U.S through food and some other beverages, which we called that bilogical weapons. In 2002, the U.S require all the food and beverage should be registered for FDA, which raised up the authorative price for the imported costs. Beyond this, defense spending and insurance would increase the cost rapidly.F
Reference
Thompson, M. (2010). The $1 Trillion Bill for Bush's War on Terror. Retrieved  

       from http://www.time.com/time/nation/article/0,8599,1868367,00.html.

Hopeful Foreground for U.S Industry

Key words: IPO (Initial Public Offering), SAIC Motor Group

This article was telling about SAIC is one of GM’s key joint venture partners in China and their company had $ 33.6 billion in sales last year and ranked 223 on the Fortune Global 500. Typically, SAIC is GM is doing IPO in the U.S capital market right now. SAIC would like to buy some stake of GM which triggers a lot of controversies between opponents and favorers. The opponents mentioned this deal would exacerbate the trade deficit of U.S with regard to China would produce GM vehicles in its country and export to the U.S. More serious, they would attempt to reform GM as a Chinese nationalize company. However, the favorers proposed GM’s revenue would be hands down by SAIC is a giant who could resist all the risk and produce profits. Beside, GM would be able to share the potential automobile market in China. In the author’s opinion, SAIC would achieve its goal because this is an inevitable trend of automobile market and world economics.  In my stance of exported markets from the U.S, trading stake is not that bad and China would become a strategic partner of the U.S. If today U.S treasury approves GM to sell its stake to SAIC, it doesn’t mean economic aggression because either behalf would receive the pay off in the future. GM should take the plunge for cooperating with foreign investors, because this should be reinforcement for IPO and the company itself. At the end of 2009, Obama had focused on new energy resources which mean those are the renewable resources, and those would bring tremendous profits to the U.S automobile industry. In 2010, China national energy administration had issued that the state council had approved 5 trillion to develop new energy resources. Some economists pointed, China would export lots of technological product about new energy resources from the U.S by the U.S will be leading in this area at that point. GM should trade some of its stake temporally by the recession and IPO. That’s no need to complicate this situation, GM would just suffer a little bit sore but it could bring everything home in the future, and eventually we will get there, so be upbeat American.

Reference

Powell, B. (2010).A Chinese Stake in GM? Bravo! Retrieved from http://money.cnn.com/2010/09/21/news/international/SAIC_GM_stake.fortune/?section=money_latest