Question

• If you were a Chinese exporter, what might you have done if you had anticipated the appreciation in the value of the yuan against the dollar that occurred in 2017?
• Why do you think the Chinese Government tried to limit the depreciation by using dollars to buy yuan? Why did it not stop the fall in the yuan?
• What are the economic and political arguments for regional economic integration? Given these arguments, why don't we see more substantial examples of integration in the world economy?

Answer 1

Answer A. If a Chinese exporter had anticipated a growth in Yuan, he would have tried to sell his goods as early as possible with lower rates. Because if the currency yuan appreciates, the exporter will have to face, lower export orders resulting in lesser quantity sold. So if he wants to sell off his remaining inventory he will have to lower his products rates and to export more.

B. Chinese government tried to limit the fall of yuan in 2017, because Trump, when elected President repeatedly named China , currency manipulator. To show the world that they are not doing anything explicitly, they tried to appreciate the yuan, by buying it with US dollars. And also to improve yuan's position in the world. This could be a planning with US, as to give US exports a rise in trades, Chinese currency was appreciated.

Since the appreciation in yuan caused the Chinese economy to slow down, lesser exports and unemployment that's why China could not maintain the appreciation of yuan and it started to fall again.

C. Economic integration is a good example to give boost to the exports and employment opportunities in geographical regions. With the various agreements between countries (Like NAFTA and EU) and the reduction of trade barriers it becomes very easy to trade in the region. Below is a list of Arguments for regional economic integration:

• Free trade and no barriers.
• More goods and products can be produced and ordered from different countries
• Customers have extended choices and resources can be used more efficiently
• Countries can get competitive advantage in the production of a certain good, with their expertise.
• Promoted free movement of capital and labor among its members (Like in the EU).
• Common external trade and entry policies, market and economic union.
• Access to new technology without visa needed or work permits.
• It facilitates political cooperation between countries and a smaller country also get importance if it's a member.

Even with lots of benefits and promotion from WTO There are not many regional economic Integrations in the world because there are some drawbacks also which few countries don't want to compromise with. These drawbacks are : Lack of national sovereignty, rise in unemployment , trade division, new trade barriers for countries outside the trading block, industries that do not have enough expertise can lose their businesses, people migration issues and greater economic inequality. Also, I think that countries want their own political and economic power and most political leaders have the tendency to enjoy that power or economic growth, they have different interests.