Question

Reread the country focus “Is China Manipulating Its Currently in Pursuit of a Neo-Mercantilist Policy?”

1. Define Neo- Mercantilist policy in your own words. Do you think China in pursuing a currency policy that can be characterized as neo-mercantilist? (100words)
2. what should the United States, and other countries, do about this? (100words)

Is China Manipulating Its Currency in Pursuit of a Neo-Mercantilist Policy? China's rapid rise in economic power has been built on export-led growth. For decades, the country's exports have been growing faster than its imports. This has led some critics to claim that China is pursuing a neo-mercantilist policy, trying to amass record trade surpluses and foreign currency that will give it economic power over developed nations. By the end of 2014, its foreign exchange reserves exceeded $3.8 trillion, some 60 percent of which were held in U.S.- denominated assets such as U.S. Treasury bills. Observers worried that if China ever decided to sell its holdings of U.S. currency, that would depress the value of the dollar against other currencies and increase the price of imports into America. America's trade deficit with China has been a particular cause for concern. In 2017, this reached a record $375 billion. At the same time, China has long resisted attempts to let its currency float freely against the U.S. dollar. Many have claimed that China's currency has been too cheap and that this keeps the prices of China's goods artificially low, which fuels the country's exports. China, the critics charge, is guilty of currency manipulation. So is China manipulating the value of its currency to keep exports artificially cheap? The facts of the matter are less clear than the rhetoric. China actually started to allow the value of the yuan (China's currency) to appreciate against the dollar in July 2005, albeit at a slow pace. In July 2005, one U.S. dollar purchased 8.11 yuan. By January 2014 one U.S. dollar purchased 6.05 yuan, which implied a 25 percent increase in the price of Chinese exports, not what one would expect from a country that was trying to keep the price of its exports low through currency manipulation. Moreover, in 2015 and 2016, the rate of growth in China started to slow significantly. China's stock market fell sharply, and capital started to leave the country, with investors selling yuan and buying U.S. dollars. To stop the yuan from declining in value against the U.S. dollar, China began to spend about $100 billion of its foreign exchange reserves every month to buy yuan on the open market. Far from allowing its currency to decline against the U.S. dollar, thereby giving a boost to its exports, China was trying to prop up its value, running down its foreign exchange reserves by $2 trillion in the process. This action seems inconsistent with the charges that the country is pursuing a neo-mercantilist policy by artificially depressing the value of its currency. In recognition of these developments, in late 2017 the U.S. Treasury Department declined to name China a currency manipulator and moderated its criticism of the country's foreign exchange policies. On the other hand, The Treasury said that it remained concerned by the lack of progress in reducing China's bilateral trade surplus with the United States.

Answer 1

Page No.: - Date_I_ neo mercantilism is an economic theory a maximizes the benefits to and interests of a country such as higher chrices for goods traded board, forice stability, staluity is supply and expansion of expouts with concomitant reduction of imports. It promotes exports, deters imports and control capital movement China's trade policy and economic cholicy more broadly not only could be but has in fact been characterized as neo mercantilist. as one economic analyst chuts it, the economic regime un china has all the hallmarks of a mercantilist system. Ho centralized government. contuals capital movements discourages imports and encowuages exhorts al until the mid-2000s china actrely encouraged foreign direct investment the such a west ainoy of incentives, many of them mericantelist and infair in nature. While the consequences of China's mericantilist policies might not have always been good for the us. economy and especially for many production workeus in traded sectors u.s. multinational corporation benefited from access to a low cost production platforme WWNA present you take a se tornara, ou are bound to blau take a step forward. You are bound to disturb something ound to disturb something.-Indira Gandhi