The dollar drops as Chinese people reduce spending

The dollar drops as Chinese people reduce spending

The United States is on the verge of imposing a set of trade sanctions on China to compensate for a sudden shift in global currency rates, which includes a drop in the dollar that is apparently being partly blamed on the state of the Chinese currency. Apparently Chinas recent reforms to their money system is having a knock on affect that can be felt around the world and now the US is urging China to take more responsibility for their role as a major world financial hub. This decision was made following a recent closed meeting between U.S. president Barack Obama and Chinas Prime Minister Wen Jiabao, in which Obama made it clear that China would need to take steps to realign their currency or the sanctions will be put in place to force the Renmenbi back into line.

According to an article from Chinese English translation , Chinas growing economy has put it in the position of being a global player and the power of its currency has now reached a level where slight changes can have a big affect on an international scale. Though not everyone agrees with Obamas latest threat of trade sanctions and believes it could both anger China and backfire on them causing a much larger problem then anticipated. China has always been known for their stubborn stance against international pressure and there is a good chance that they will not back down to Obama's call for action, resulting in their own trade sanctions against America. If China were to stop buying from the US and they were unable to purchase from China, America would end up having to look to other countries for products sold to them at a much higher cost, a move that would inevitably cause the dollar to fall even further.

Realistically America needs countries like China to help plug its massive deficit, which reached an all time low in 2009 when it fell to -2.3% of the national income and has gradually been getting worse since. China on the other hand is able to save a massive 54% of its national income but has half the GDP of America, a particularly low figure for a major country. With both countries at risk of sustaining loses the situation is in danger of turning into a full scale trade war. So what are the solutions?

America is leaning more towards the idea of forcing China into a currency shift, though a similar tactic has been put into action in the past on its own country when the US dollar was allowed to fall in value in hopes that the low dollar would attract more investment; unfortunately it didn't have as strong affect as was hoped for. The other proposed solution would involve China solving its own low GDP problems, by implementing actions that would generate more private consumption.

Whatever the outcome of this current situation it is unlikely that China will allow their currency to devalue in an attempt to stabilize the world currencies, in fact doing this has little chance of helping the US dollar rise and won't help China in the long run either.

If you're planning to live and work in China in the near future then being aware of the cultural differences and the local news is vital to making your life easier. Do you have a Chinese language report that you want translated or perhaps you do business with a China based company and need someone to help communicate your needs. Certified Chinese translation services can offer an affordable and wide range of translation services, no matter what the dialect; don't let problems arise due to misunderstandings caused by poor communication.

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