Several US economists call on China to end the currency dispute with the US and revalue the Yuan. The benefit for the US and other countries would outweigh the risks for Chinese exports. Experts estimate that the world needs to correspond to an appreciation of Beijing with a stimulus of about three percent of the gross domestic product in three economic regions: the US, Eurozone, and Japan. China enforces its policy of forced and poorer exporting capital to the rest of the world and this deprives China of the demand that the rest of the world has.
The US has accused China of artificially lowering the rate of the country’s currency, the Yuan, to keep its exports inexpensive. The U.S. Senate recently passed a resolution, which seemingly threatens China with punitive tariffs if the Yuan is not raised. Meanwhile, China announced the lifting of the import ban on pork from the United States, which had been in effect for almost a year. According to a report in the “FTD”, this has been accumulating ever since China indicated that it might consider a currency appreciation. More than one-thousand companies are undergoing “stress tests” to discover what impact a revaluation of the Yuan would do to the companies.
Officially, the Chinese government defended the exchange rate of the national currency, the Yuan, as being more than adequate. At the same time, the Deputy Commerce Minister Zhong Shan warned people in an interview with the “Wall Street Journal” that a re-evaluation of the currency could have disastrous effects, as it could drive many exporters in the People's Republic to ruin. Shan recently visited the US to address “contentious issues in trade”.
The profit margin of many exporters lies at less than two percent. The appreciation of the Yuan in 2005 forced many companies out of business.
“Undervalued Chinese currency”
Chinese Premier Wen Jiabao has said often that he did not believe the Yuan was undervalued. “We oppose any countries that are participating in mutual recrimination or take strong measures to force others to their currency worth,” he said in a press conference earlier this year.
Experts argue: Even the extreme export surplus shows that the Chinese currency is undervalued. Beijing believes that the rate of the Yuan against the dollar over twenty months has stabilized by buying large-scale US securities.
Therefore, the question you should be asking yourself – is now a good time to buy the Yuan? The answer – yes. The Yuan is strong and there are no signs of weakness in sight. The American Dollar is having issues trying to stay afloat and the Chinese are capitalizing – as they always have.
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