China's currency manipulation...Good or Bad?

"China is taking American jobs away" is the common statement that Americans from across the nation are saying. However, is this actually a bad thing for the United States' economy. I think not. The main reason why China is able to provide the U.S with cheap consumer goods is because the Chinese purposely undervalue their currency. What does this mean you ask? Well, "the lower the value of the yuan (China's currency), the better it is for China’s exporters. Basically, if one dollar buys 7 Yuan, and an exporter sells a Chinese shirt for 10 dollars, then he pockets 70 Yuan. But if one dollar was worth only 5 Yuan, the exporter would only be able to pocket 50 Yuan." The value of the U.S dollar is also purposely overvalued for the same reason. The downfall to this, however, is that it leads to the inflation of currency so there is a limit to how much currency can be undervalued or overvalued.

So is this manipulation of Chinese currency good or bad? The truth is that currency manipulation results to be  a great thing for both China and the United States. While Chinese exporters benefit from an undervalued yuan and an overvalued dollar, American consumers (especially lower class individuals) and businesses who buy their products from China benefit as well. In fact, if China was to re-evaluate its currency, then the U.S would be worse off economically, because Americans would no longer have access to cheap consumer goods. If the yuan was to appreciate, it would be like a protectionist tariff against Chinese goods. Due to this, only domestic producers who compete against foreign rivals would benefit. The minority would win while the majority loses.Overall, we should actually be thankful to China, because without them, our situation would be much worse.



Manshu. "How Does China Manipulate Its Currency?" One Mint. N.p., 26 Jan. 2009. Web. 06 Sept. 2012.


Perry, Mark J. "China Manipulates Its Currency." Eblogger. Google, 1 Nov. 2011. Web. 06 Sept. 2012.