Review an 1-2 page article concerning economics

Review an 1-2 page article concerning economics

Based from the article made by Cohen , Chinese government seems to be determined , according to the US House of Representatives , in revaluating their currency in for them to have sufficient market powers to manipulate the international economy by currency manipulation ADDIN EN .CITE Cohen20071 1123David CohenChina Hints at Further Appreciation of YuanBusinessWeek12007htt br

/www .businessweek .com /investor /content /may2007 /pi_343319 .htm chan search (Cohen , 2007 . The revaluation of the Chinese Yuan would serves as a threat for the US for

the former would now have a chance of improving its net exports by having more imported raw materials needed to produce China 's exports . For China to be able to this , they had to increase their bank reserves and interest rate for the market to demand more of the Yuan currency . As what we have learned in class , having a high demand of the local currency would make it to revalue since locals would want to hold more Yuan than any other currency , thus , leaving foreign currencies with less demand to carry on

This scenario somehow violates the assumption that with a currency revaluation , exports must be negatively affected . But in the case of China it 's the other way around . They were able to use it as a vehicle towards improving their net exports . The reason behind this is the fact that China has a comparative advantage over other countries in terms of operating expenses in labor . In short , savings generated from cheaper labor force offsets the negative effects of Yuan revaluation , thus giving way for China to export more in the international market

This clearly illustrates us that theories inside the four corners of our classrooms may not hold in reality and sometimes contradicts economic models written in our books . To some extent I 'm a bit anxious about the revaluation of China for they have been noted for being the master of black market and low quality products . If most of the goods available in the market came from China , infant industries will be perished and that is what I do not want to happen . We learned that what is best in the market is to have a competition to increase the welfare of not only the producers , nor the consumers but the society as a whole In the first place that is what economics is- searching for optimal level for the welfare of the majority

REFERENCES

ADDIN EN .REFLIST Cohen , D (2007 . China Hints at Further Appreciation of Yuan . BusinessWeek ,

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