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Low safety standards may contribute to the low price of goods produced in China, but the main reason is that the Chinese government deliberately keeps the value
by weavejester 13y ago
Low safety standards may contribute to the low price of goods produced in China, but the main reason is that the Chinese government deliberately keeps the value of the yuan low against the dollar.
- melling 13y agoThere must be some long term economic repercussion for trying to manipulate the price of your currency?
- jiggy2011 13y agoNot really, if you are a net exporter and most of your countries citizens never travel abroad. It might present an issue if they wanted to buy a lot of US made weapons for example, but China is big enough that it largely does not need America.
- weavejester 13y agoThere is. China essentially needs to sell off a lot of yuan and buy up a lot of dollars to keep its currency weak, and it does this by purchasing vast amounts of US debt. There's a series of videos about it at the Khan Academy if you're interested: https://www.khanacademy.org/science/core-finance/money-and-banking/china-us-debt-situation/v/floating-exchange-resolving-trade-imbalance https://www.khanacademy.org/science/core-finance/money-and-b...
- yummyfajitas 13y agoThe short term repercussions are certainly clear: Chinese goods are cheaper than they would otherwise be, which increases production in China. Purchasing power of people holding Yuan (i.e., the Chinese people) is lower than it would otherwise be. Basically, China is making it's people poorer in order to stimulate production. In the long run, China is stuck holding a lot of US debt, the value of which will eventually be inflated away.