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For some time there has been tension between the United States and China over Beijing's exchange rate policy. Many U.S. lawmakers want President Obama to formally label China as a currency manipulator and have also threatened to pass legislation that could lead to tariffs on some Chinese goods if Beijing does not quickly raise the value of its currency by a large amount.
However, Chinese President Hu and other Chinese officials have defended China's exchange-rate policy as an "internal affair," and have said they would not bow to external pressure to change it.
Bernanke has publicly stated that, "most economists agreed China's yuan currency is undervalued and t was one of the factors that caused the global recession" and some economists speculate that Beijing will revalue its currency by at least a small amount in the coming months.
Do you think that China will succumb to international pressure to alter its currency value? Or will China maintain its strict control over the country's currency despite its potential to threaten the global economy?
I have a feeling China could be awfully stubborn in this situation. The control of Communism there could make it difficult for any changes to happen. How much does China care about the global economy? My guess would be that they probably don't. However, just because they say will not be swayed by actions such as tariffs, you never know how they might react to pressure.
ReplyDeleteI suspect China will play an appeasement role and make a small alteration to the valuation of its currency but ultimately only enough to make the international community happy. In reality neither China, nor the rest of the world is really interested in confrontation right now, both sides have too much to lose.
ReplyDeleteI think that most of the world would want China to stop making their currency undervalued but of course China doesn't want to change the way they are doing any thing. Also, I agree with tcmt that no one in the world wants confrontation right now. That would be just be a different kind of crises that the entire world would have to deal with.
ReplyDeleteI don't see any way that China would change its currency value. I think they probably realize that they're gaining economic power in the world, giving them more freedom to do as they choose. Perhaps a small change may occur, as an appeasement, like tcmt suggested, but China won't be likely to give in all the way.
ReplyDeleteI don't think they will give it all away either because of the gains they have made through controlling their currency's exchange rate. However, if it becomes a large enough issue world-wide rather than just in the U.S. I think it could definitely usher change especially if they get the blame for causing the world-wide financial melt-down once it's over. Because...China could live with tariffs from the U.S. or could offset them through other moves, but China could not live with world-wide tariffs or unfavorable trade regulation.
ReplyDeleteI agree with Noah that they will be pretty stubborn in this situation. They will continue to manipulate their currency unless several countries put pressure on them to change it. China realizes they have a lot of power in the global economy and they will try to exploit that and use it to their own benefit even though it helped lead to the global recession.
ReplyDeleteI agree with Noah as well. They do not seem to care that much about the global economy and will be fine manipulating their currency for the time. However, if something happens where China becomes pressured then they may give in and change..
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