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/