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China’s Currency Manipulation and the Effect on the United States

China’s Currency Manipulation and the Effect on the United States. Derek Griest, Fraser Hunt, & Alka Shah. Stuck on U SA. Essentially 1994 (1997 officially) until July 2005, it was pegged strictly to the dollar at about 8.28 Yuan to the dollar.

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China’s Currency Manipulation and the Effect on the United States

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  1. China’s Currency Manipulation and the Effect on the United States Derek Griest, Fraser Hunt, & Alka Shah

  2. Stuck onUSA • Essentially 1994 (1997 officially) until • July 2005, it was pegged strictly to the • dollar at about 8.28 Yuan to the dollar • Still believed to be vastly undervalued • Now adjusted nightly by Zhou • Xiaochuan according to basket of • currencies • Appreciated slightly since July 2005 • Accused of being currency manipulator

  3. Value of the Yuan Against the Dollar Over Past 2 Years

  4. Deficit • Overall U.S. Deficit $726 billion of 2005 • Deficit of $201.6 billion with China for 2005 • Almost 25% • Due to the low currency rate of Yuan, we can import from them cheaply and exports are expensive for us.

  5. Reinvest • China reinvests in the US economy • Feel that we are not going to default, though growing worried • Bonds and foreign reserves • Keeps our inflation low Deficit Reinvestments Bonds, Equities etc.

  6. M.A.F.D. • Mutually Assured Destruction, now • known as MAD 2 or MAFD • (Mutually Assured Financial Destruction) • If China stops investing then the likely • results are bad for them; world • US refusing to hone deficit and trying to • hold it over China’s head

  7. Jobless • Due to cheap imports, there has been a loss of manufacturing which put people out of jobs, especially the textile industry.

  8. Protectionism • U.S. wants to add duties 27.5% on Chinese imports until China allows its currency to float more freely against the dollar • To decrease bilateral trade deficit with China • Believed that effect could be minimal due to other countries • China feels prices are lower in U.S., therefore refuses to change currency policy

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