2. The USA - China economic relations
U.S.-China economic ties have
expanded substantially over
the past three decades.
• Total U.S. - China trade rose
from $2 billion in 1979 to
$457 billion in 2010.
• China is currently the second
largest U.S. trading partner,
its third-largest export
market, and its biggest
source of imports.
3. • The trade deficit has
surged, rising from
$10 billion in 1990
to $273 billion in
2010.
• Trade became very
complex
• Large and growing
market for US
exporters.
• low-cost goods from
China greatly benefit
U.S. consumers .
4. China‘s Holdings of U.S. Securities
• China’s holdings of U.S.
public and private securities
are significant.
• These securities help the
federal government to
finance its budget deficit.
• China is the largest foreign
holder of U.S. Treasury
securities, its holdings was
reported by department of
treasury to be $1,174 billion
as of May 2011
5. !??What is the impact
The impact is that China had gained an
advantage from holding this huge number of
treasury securities which is the ability to limit
the appreciation of the RMB to the US
dollars.
How it could work ???!
6. • This could be achieved as
china requires the Chinese
exporters to pay in dollars
in exchange for the RMB as
they often are paid in
dollar, so as a result the
Chinese government now
accumulates a significant
amount of dollars which
makes it control the price
of the Yuan in the exchange
rate market against the
price of the US dollars and
that’s how china keeps the
devaluation of its currency.
7. Impact of undervaluing RMB
• The undervalued RMB have resulted in
limiting the level of U.S. exports to China.
• Also Obama had warned that the economic
relationship between the two countries had
become “deeply imbalanced” in recent
decades, with a yawning trade gap and
huge Chinese holdings of U.S. government
debt.
8. The impact of the Chinese currency
devaluation on US economy
9. The US response to the Chinese
currency policy
as china is not allowing its currency to
appreciate
a lot of Americans are losing jobs especially in
the manufacturing sector
therefore the US Senate passed a bill that
would allow for new tariffs on Chinese
exports to the United States if China
continues to undervalue its currency.
10. But china opposed what the US have claimed
that China had manipulated the value of its
currency, and the have said that the renminbi
exchange rate is gradually achieving a more
balanced and reasonable level.
The US Senate's move to force its trading
partners currency to appreciate through the
passing of law is in violation of international
rules and the country's obligations to the
world.
11. So the debate is still ongoing
between the US and china
whether to remove the bill or
not or take further actions by
imposing sanctions on china ,
putting in considerations that
this violates the WTO rules
and this may lead to increase
the hatred between the two
countries, so no one knows
where the debate will take the
two countries.
