Question

Can you explain how China values its currency?

How do you suppose the World Trade Organization (WTO) allows China to manipulate its currency?

Why do you suppose China’s Gross Domestic Product (GDP) was able to surpass that of the United States earlier than expected?

Answer 1

Can you explain how China values its currency?

After years of economic growth chinese renminbi also called yuan has been added to the list of elite global currencies by th IMF alongside the dollar, euro, pound and japanese yen, the renminbi is officially recognized by the IMF to be safe, reliable and freely usable however, despite this designation, china has been known to practice currency manipulation in an effort to influence the value of the yuan.

So how china values or manipulates its currency

Basically, currency manipulation is the way countries attempt to avoid the negetive market effects of having a strong currency. The value of currency is essentially dependent on how much or how little it is used, which in turn is dependent on how strong a country's trade balance is.

When china has a trade surplus, people in other countries have to buy chinese currency in order to buy chinese goods, with an increase in demand, the price, or "value" of the currency goes up.

However as currencies gets stronger, it becomes more expensive to purchase goods other, cheaper currencies become more advantageous to spend. In a way, currency itself can be viewed as a product, whose price is based on demand, as china has seen rapid and intensive growth, they've attemped to stem the inevitable devaluation of their currency as their trade surplus grows.

This is done through currency manipulation which is when one currency is used to buy huge amounts of foreign currency. That makes it possible to prevent the currency from gaining too much value, while also bolstering other currencies as well, and keeping them from becoming too competitively cheap.

How do you suppose the World Trade Organization (WTO) allows China to manipulate its currency?

The one crucial disadvantage of the WTO, however, is its lack of jurisdiction over exchange rates.Though the IMF recognizes currency manipulation as an unfair advantage, the IMF cannot currently undertake enforcement actions against manipulating countries. Conversely, the WTO is an active sanctioning body, but currently does not recognize currency manipulation as grounds for recourse.

How do you suppose China's Gross Domestic Product(GDP) was able to surpass that of United States earlier than expected?

China is planning for the future and the U.S. is not. China investing heavily in future technologies that could become future export products. It does this to benefit its own economy and is in areas it can capitalize on now and into the future. For example today: High speed trains, subways, electric cars, electric buses, infrastructure, solar energy, wind power, high density batteries, third generation nuclear power plants, passenger jets, jet engines, robotics, factory automation, logistics, and electronic communications. Projects like OBOR have started to create new opportunities for China. It's trade and infrastructure projects in the Americas are ramping up, especially in South and Central America. Looking beyond today, It is working on ‘green energy’ beyond solar and wind, things like 4th generation Thorium Molten Salt Reactors and fusion reactors, and carbon emission structures, nanotech applications, carbon fibre applications, biotech applications like synthetic biology and genetics, quantum communications, space mining and exploration, preventive healthcare development, advanced education technologies.

The U.S. at a crucial point in the future, It seem so wrapped up in wars, moral and technical compass is steering on the wrong course. Though US is still strong technically today and a world leader, political leaders have blunted or stalled out many initiatives that could have continued trajectory of greatness. The things China sees in her future have been in vision before. America and Americans can do great things when her leadership is strong and aimed correctly. Time will tell whether in the next 10 to 20 years, economic and political leadership will change in the world.