Open blog #10 China and “Currency Manipulation”

Open blog #10   China and “Currency Manipulation”

         “We don’t win at trade, China, everybody, Japan, Mexico, Vietnam, India, name the country. Anybody we do business with beats us. We don’t win at trade.” – Donald Trump

         The main reason for me to focus on this sentence is because I am an international student from China, and also this has connection with my daily life – exchange rate! So I want to know more about this news.

         In the news, Donald Trump has referred to China as America’s “number one abuser” in international trade. “Through manipulation of the yuan, the Chinese government has been able to tip the trade balance in their direction by imposing a de facto tariff on all imported goods.” (From EC 202 note)

         Manipulation of the yuan is mean Chinese government keep its exchange rate $/yuan, “undervalued,” making Chinese goods less expensive for Americans and American goods more expensive for Chinese, contributing to trade surplus for China. This is mean that American want more yuan to buy Chinese goods than Chinese want dollar to buy American goods. In other words, Chinese had a trade surplus – positive net demand for yuan.

As I mention in the last week’s blog post, net export equal to net capital output, this change in the net export must be matched by NCO for China. I mean Chinese buying more American assets than Americans buy Chinese. For Chinese to keep exchange rate low, Chinese must increase their net capital output, such as US government bonds or simply US dollars. This inference make sense because Chinese government really do this kind of thing in the real world. In the early 2000s China did this, accumulating lots of US bonds and dollars

From the EC class, professor told us that however since 2010, the yuan has appreciated relative to the dollar and other currencies. The IMF says the yuan is no longer undervalued. Which is mean that, as a Chinese international student, I can exchange more dollar in the same amount of yuan. But after that Chinese have been selling some of their dollar reserves, so if anything trying to keep the yuan from falling

This is same with the situation right now and like a disaster for the international student from China. Because since I study in the United Stated, the exchange rate is keep increasing which is mean that yuan is depreciate. This is mean that tuition is more expensive for me to study in the United Stated then is before. It time for me to find a part-time job and earn some pocket money so that decrease the economic pressure in my family.

Citation: EC 202's notebook