China

1
Chinas Currency Manipulation and the Effect on
the United States

• Derek Griest, Fraser Hunt, Alka Shah

2
Stuck on USA

• Essentially 1994 (1997 officially) until
• July 2005, it was pegged strictly to the
• dollar at about 8.28 Yuan to the dollar

• Still believed to be vastly undervalued

• Now adjusted nightly by Zhou
• Xiaochuan according to basket of
• currencies

• Appreciated slightly since July 2005

• Accused of being currency manipulator

3
Value of the Yuan Against the Dollar Over Past 2
Years
4
Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005
Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change
Year South Korea Canada Japan China India Euro United Kingdom
2000 - - - - - - -
2001 12 4 12 0 7 2 5
2002 4 1 15 0 4 -5 -3
2003 -10 -11 -10 0 0 -15 -9
2004 1 -7 -10 0 -5 -10 -10
2005 -10 -7 -5 -1 -5 0 0
Total Change 2000-2005 -5 -19 0 -1 0 -27 -17
5
Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005
Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change
Year South Korea Canada Japan China India Euro United Kingdom
2000 - - - - - - -
2001 12 4 12 0 7 2 5
2002 4 1 15 0 4 -5 -3
2003 -10 -11 -10 0 0 -15 -9
2004 1 -7 -10 0 -5 -10 -10
2005 -10 -7 -5 -1 -5 0 0
Total Change 2000-2005 -5 -19 0 -1 0 -27 -17
6
Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005
Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change
Year South Korea Canada Japan China India Euro United Kingdom
2000 - - - - - - -
2001 12 4 12 0 7 2 5
2002 4 1 15 0 4 -5 -3
2003 -10 -11 -10 0 0 -15 -9
2004 1 -7 -10 0 -5 -10 -10
2005 -10 -7 -5 -1 -5 0 0
Total Change 2000-2005 -5 -19 0 -1 0 -27 -17
7
Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005 Strength of U.S. Dollar Against Various Currencies 2000-2005
Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change Percentage Change
Year South Korea Canada Japan China India Euro United Kingdom
2000 - - - - - - -
2001 12 4 12 0 7 2 5
2002 4 1 15 0 4 -5 -3
2003 -10 -11 -10 0 0 -15 -9
2004 1 -7 -10 0 -5 -10 -10
2005 -10 -7 -5 -1 -5 0 0
Total Change 2000-2005 -5 -19 0 -1 0 -27 -17
8
Deficit

• Overall U.S. Deficit 726 billion of 2005
• Deficit of 201.6 billion with China for 2005
• Almost 25
• Due to the low currency rate of Yuan, we can
  import from them cheaply and exports are
  expensive for us.

9
Exports (Millions of Dollars) Exports (Millions of Dollars) Exports (Millions of Dollars) Exports (Millions of Dollars) Exports (Millions of Dollars) Exports (Millions of Dollars)

  China USA China Growth USA Growth China's Minus the USA
1994 121,006 512,627 0 0 0
1995 148,780 584,743 23 14 9
1996 151,048 625,073 25 22 3
1997 182,792 689,182 51 34 17
1998 183,712 682,138 52 33 19
1999 194,931 695,797 61 36 25
2000 249,203 781,918 106 53 53
2001 266,098 729,100 120 42 78
2002 325,591 693,103 169 35 134
2003 438,228 724,771 262 41 221
2004 593,329 818,775 390 60 331
10
Reinvest

• China reinvests in the US economy
• Feel that we are not going to default, though
  growing worried
• Bonds and foreign reserves
• Keeps our inflation low

Deficit
Reinvestments Bonds, Equities etc.
11
M.A.F.D.

• Mutually Assured Destruction, now
• known as MAD 2 or MAFD
• (Mutually Assured Financial Destruction)

• If China stops investing then the likely
• results are bad for them world

• US refusing to hone deficit and trying to
• hold it over Chinas head

12
Jobless

• Due to cheap imports, there has been a loss of
  manufacturing which put people out of jobs,
  especially the textile industry.

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14
Protectionism

• U.S. wants to add duties 27.5 on Chinese imports
  until China allows its currency to float more
  freely against the dollar
• To decrease bilateral trade deficit with China
• Believed that effect could be minimal due to
  other countries
• China feels prices are lower in U.S., therefore
  refuses to change currency policy

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