China-U.S._Trade

China-U.S. trade Abstract It is a study of China-U.S. trade situation. We can learn from three aspects to discuss, exchange tate in RMB, trade imbalance, and intellectual property. In first aspect, the Sino-US relations sank into a deadlock whether the exchange rate in RMB should revalue. In second aspect, I studies the trade balance made the current account to know situation of two countries. I found that trade surplus in China, profits in U.S. In third aspect, it hard to solve the problems completely because of huge population. However, it is a way that U.S to achieve more benefits in China. Main Body A serious economic crisis result from subprime mortgage crisis was coming in 2008, almost developed countries could servive from it. The bad impact on around the world, and when every government worried about GDP falling except China government maintain the economy growing trends. As is known to all, China economy grows quickly beyond our imagination. So far, china remains the largest holders of jewelry necklaces U.S. Treasury bonds. There are three problems between China and U.S , exchange tate in RMB, trade imbalance, and intellectual property. China exchange rate in RMB In recent years, US becomes the world’s biggest debtor nations, and China is the largest second creditor of US. Because of economic crisis, US make mesure to devaluate currency to reduce the loss of recession, lighten their financial loads, rescure the coorporations which stands on a high wire, and tackle the unemployment problem. At the same time, it has a serious shrinking of China’s foreign reserves. Unfortunately, this measure has a little effect on recession. Then U.S presented a statement that China government controls the exchange rate in public, and gave China strong pressure growing on China to revalue currency. Despite the impact of the global financial crisis and all kinds of other difficulties, the Chinese government has actively tried to boost domestic consumption and stimulate imports, Chen said. Maintaining a relatively stable RMB exchange rate serves the need of China’s economic development as well as the world’s economic stability, he added Therefore, the Sino-US relations sank into a deadlock of conflicting interests. China- U.S Trade balance The balance of payment includes three account, that is current account, capital account and financial account.In this problem, we study how the current account affects the balance of trade.The current account balance is the sum of the balances of trade in goods and services, current transfers, and investment income. The trade imbalance exists a long time between China and U.S. In the long term, china maintains the trade surplus, on the contrary, U.S keeps the trade deficit. We can see this two figures on current account. China current account China reported a current account surplus equivalent to 134459.9 Million USD in June of 2009. Export growth has continued to be a major component supporting China's rapid economic growth. Exports of goods and services constitute 39.7% of GDP. Figure 1(source:bureau of economic anaysis, www.tradingeconomics.com) [pic] According to the figre 1, china always keep the trade surplus. Especially in 2009s, china trade was $426107.4 million. And it seems a trade cycle that one year is low, then next the year is high, cycling one by one. Postive current account balance,means that capital and financial accounts must be ni deficit to create a balance of money United States Current Account The United States reported a current account deficit equivalent to 115.6 billion USD in December of 2009. The United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world Figure 2(source:bureau of economic anaysis, www.tradingeconomics.com) [pic] According figure 2, US always keep the trade deficit. Nagative current account balance, means that capital and financial accounts must be in surplus to create a balance of money. There are four reasons that trade imbalance between China and U.S At first, current account balance is a main reason, China postive current account balance means a large exports and save foreign currencies, then imports cheaper. U.S negative current account balance means a large imports and large debts, then imports more expensive. Second, it is an excuse that trade imbalance that U.S avoids responsibility of recession, in fact,traditional industry have been shocked by infant market exports for a long time leads to be trade deficit and serious unemoployment problems in manufacture. Next, the exprted Product Structure determined thepreference of consumption. China major exports are: office machines & data processing equipment, telecommunications equipment, electrical machinery and apparel & clothing. China imports mainly commodities: iron and steel, oil and mineral fuels; machinery and equipment, plastics, optical and medical equipment and organic chemicals. A low class people in U.S have a strong demand for China productions which are cheaper than others, and it hard to find substitute goods, then it provides China a large market result in the trade deficit. U.S have many restriction items to export. For example, high technic production restricted export, and household goods is easy to find substitute goods. In additon, China trade surplus was 83% parts comes from foreign companies. Trade surplus in China, however, the benefits in U.S. For example,P&G Company, many goods produced domestically in foreign companies, sells to the foreign markets,in the end, the benefits to the P&G Company in China. Finally,China as the second largest creditor of U.S Treasure Bond. From this, it can be seen that U.S must undertake a large debts means lilltle foreign reserve, and In order to reduce the preesure of debt, U.S carried high inflation, and deficit covering through importing huge capitals, even devaluate currency, and claims China to revalue currecy. In a word, the trade imbalance for a long time leads to a high capital demand to pay for imports in U.S, then it had not enough capital to operate domestic manufacture, the industries had to stop, and workers would lose jobs, the whole economy would imbalanced. It seems that economic crisis had a little effect on China, in fact, there are many FDI and MNC in domestc like guangzhou city, most of them are subsidiary corporations from U.S. Many manufacture have no capital to operate the company, and then broke down. Parent companies in U.S was gone bankupt as well as the subsidiary corporations had closed down. As a result of it, a number of workers have to lose jobs in China and U.S. Intellectual property It is a barrier to communicate with Sino-US. U.S government claims a statement that requires China government must take measure to protect the intellectual property, It is really a thorn problem that there are so many people in China that someone always are free from the rules. Conclusion there is no doubt that every country is aim to achieve itself the maximization of benefits. In these respects, it looks like China wins finally. But the last winner is U.S. First, US adhere to revalue currency in RMB. Not only does U.S reduce debts, but reduce China exports to U.S. Second, trade imbalance in Sino-US. Though trade surplus in China, profits in U.S. Third, it is an excuse that just an another way to maximiza benefit from developping country. In one word, China is in a comparatively weak position in this trade. U.S owns still a powerful economy in the world. References W.Charles Sawyer, & Richard L.Sprinkle. International Economics. PEARSON Prentice Hall.pp.266-270 .Sherry, China Financial Daily, November 30, 2009, China current account datas & China exports goods .http://www.tradingeconomics.com/Economics/Current-Account.aspx'Symbol=CNY#ixzz0l3iIncpq U.S current account datas. http://www.tradingeconomics.com/Economics/Current-Account.aspx'Symbol=USD#ixzz0l3p7NiJk