Trade relations between USA and China Essay Example | Topics and Well Written Essays - 1000 words

Trade relations between USA and china - demonst respect ExampleRanging from the ongoing funds war to accusations of immoral job policies, factors which have led towards this destabilization of employment relations are not only economical but, perhaps, have a political milieu too. Firstly, single of the major challenges faced by the USA-China trade is the prominent USA accusation of manipulating the Chinese currency. Over the erstwhile(prenominal) few years, the official currency of China, Yuan, has been held in a floating metamorphose rate system though it has only been allowed a narrow margin to fluctuate. M whatsoever analysts and economists in the USA however urge for a more flexible tack rate which pivots around the marketplace equilibrium determined by the market forces of currency demand and supply. Despite of the fact that Yuan has been allowed to fluctuate more liberally and has redden travel by 20% in value against the USA Dollar since 2005, Japan, European Union and USA soon enough accuse China that it manipulates its currency by deliberately keeping it at a low exchange rate in relation to the USA Dollar with a view to make the USA products little competitive and, simultaneously, the Chinese goods and services more competitive and relatively cheaper than the USA goods. This lowered currency rate leads to a rise in Chinese exports whereas USA exports decline. A large amount of trade shortage suffered by the USA in trade with China adds to the gravity of the accusation. Concerns for China regarding this issue are that the USA, humanity Trade Organization or APEC might impose trade sanctions on China for its problematic currency exchange rate. These sanctions may prove very costly for the growing Chinese economy as the knowledge bases second largest economy is principally led by mass amount of exports to its trading partners. Restrictions over free trade for China may cause the deceleration of its growth or may even put it to a halt. T he trade balance between USA and China in 2011 exceeded $295 billion and any probable sanctions may drastically affect this huge amount of traded commodities between the devil giants. Moreover, Chinas Current Account surplus has also been declining during the past few years and the consequences of USA pleas regarding the unfair trade advantage China has may turn the already withering surplus into a trade deficit, whereas China may also lose its most important trade partner (Davis). The list of allegations upon China is stretch and does not restrict itself to the currency devaluation. China is also accused by the USA for adopting an unfair exchange rate regime. Yuans rate of exchange has been, contrarily to the US allegations, in conformity with the internationalist monetary system which is operating at the time. Observing the variations from a fixed to a floating and therefore from the fixed peg to a basket peg, Chinas exchange rate valuation has endlessly been repudiated by US A. This might lead to a further withering of trade relations between the two nations in the near future. (Moosa viii) Also, on the accusation list is the allegation upon China of piling up its opposed reserves. Again, the charge seems to be lacking ample rationality as any nation is allowed to purchase contrasted currency reserves and to accumulate those reserves in order to minimize its risk of a defective economic slump in the future. Similarly, China has done the same and has acquired pretty huge amounts of US Dollars in the