Capital Flows with China



Abstract

This paper focus on the Exchange rates between the China and America which have a significant impact on foreign trade of various countries, affecting the price ratio of exports and imports, causing a change in domestic economic situation, as well as affecting the competitiveness of firms, the profits of enterprises. Using the exchange rate, the employer compares its own cost of production to world market prices. This makes it possible to reveal the result of foreign trade operations of individual enterprises and the country as a whole.

Capital Flows with China

Introduction

Sharp fluctuations in exchange rates strengthen the international economic instability, including monetary and financial relations, which cause negative impact on social and economic consequences, the loss of one and the winnings of other countries. In this paper we will be focusing on the Capital flows with China, whether the Chinese Yuan is being manipulated and whether this is a factor of U.S. unemployment due to a distorted exchange rate.

Discussion

Financial crisis, the United States was more dependent on China's foreign exchange reserves in order to make sure that China vigorously buys U.S. Treasury bonds. This has supported United States through their crisis as an important lever. However, according to the other countries more and more serious financial crisis led to the weak dollar, U.S. dollar peg the Yuan will all the way down followed by floating, so that the euro yen and other free-floating currency relative to the dollar and the Yuan are greatly appreciated.

Actually, the financial crisis hit the world economy and leads to severe atrophy of the world's export trade, but because Yuan follow the dollar all the way to devaluation, export commodity prices in other countries is even more difficult to compete with China. Bizarre results, almost all countries the decline in exports is more serious, with the exception of China thriving export trade continued rapid growth. No, the German lost exports of the world's first crown of laurels are honored zone to the head of the Chinese people (Anonymous, 2010).

Previously Chinese goods were cheaper due to cheap labor along with excluding the quality of low-cost shoddy Chinese goods. This was due to the price behavior of the internecine contention export orders and government subsidies on export trade which constitutes the low prices. However, although the Chinese exports are still competing each other in order to maintain the lower prices (Evenett S., 2010).

This may result in labor costs continue to rise, increasing emphasis on quality lead to a rapid increase in raw material costs, and the Chinese government's export subsidy system more and more international , people are increasingly seeing the importance of the RMB exchange rate. When the financial crisis resulted dollar to be depreciated, the price advantage of Chinese exports will be more apparent (Woo, 2010).

Trade and Economic Policy and impact on the U.S. Unemployment

First, the U.S. economy started to recover, but the overdraft products formed by the economic gap and the funding gap, resulted in external economic dependence which is ...