Manufacturers in the US want China to increase the value of the yuan. They say C

Question

Manufacturers in the US want China to increase the value of the yuan. They say China undervalues their currency making their products cheap, thus undercutting American business. Some believe that this is why Americans are losing jobs. Wal-Mart and others believe it is a good thing though because it keeps prices low for the products they sell. Is low yuan value good for the US because of low prices or is it costing too many Americans their jobs? Use Google to search the subject of currency manipulation for additional information to debate this topic.

Explanation / Answer

A recent event which was hosted by the Bretton Woods Forum highlighted that there has been significant injury to the United States in the form of lost jobs and exports because of the undervaluation of the renminbi. But before coming to any conclusion, it's importantto discuss how China manages its currency. China sets the value of its currency, the yuan, to equal the value of a basket of currencies that includes the dollar. This means China pegs its currency to the dollar using a modified fixed exchange rate. When dollar loses value, China buys dollars in the form of U.S. Treasury bills to support it. In 2016, China began relaxing its peg as it wants market forces to have a greater impact on the yuan's value. As a result, the dollar to yuan conversion has been more volatile since then. China's influence on the dollar remains substantial.

Americans do enjoy the low prices of the products relatively as the goods are manufatured in China. Production in China is cheap for the American business as their the cost of living is low and no practical limit of minimum wages exist. But because of this, the businesses preferopening up their warehouses and factories in China. They prefer outsourcing the jobs over there to cut down their cost of production. So, more than the advantage of low prices, the Americans are losing jobs over this.

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