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Is a Trade War at Hand?

Recent moves on Capitol Hill may force CFOs to carefully consider what will help them versus hurt them.

Janet Kersnar, CFO Magazine
November 1, 2010

Who really Benefits from the Weak Yuan?

The main street view of the weak Yuan is that, China gains the advantage by taking away American jobs by keeping the Yuan weaker than it should be. Unemployment is a real big issue and particularly a political issue during the election year. The Wall Street's concern is more about the profit and the competitiveness of the company in the global market. Definitely the Americans are not happy with the current status quo. Since the Chinese are gaining competitive advantage, are they happy with the current status? Since Chinese make more products than what they can consume, there is a large trade surplus. The Chinese provide the American the cheap goods. In return, the Chinese get some form of paper called US Dollar. As the US Fed is printing more paper, the paper in the hands of Chinese government is worth much less in value. To keep Yuan weak, the Chinese government has to print more Chinese paper (Yuan) to keep the exchange rate stable. More Chinese paper (99% used in China) cause the inflation (4% in October). Americans get the cheap goods while the inflation in US is less than 1% (50% or more US Dollar is circulating out of US). Chinese get some paper in hand which is devaluing. I don't think the appreciation of Yuan will help US job market in any favorable way. Don't forget Yuan has been appreicated 20% since 2006, but it never helps keeping US jobs or balancing the trade. In fact, a stronger Yuan will help Chinese in a long term.

Posted by Liming Wang | November 21, 2010 10:54 pm

Boxed In

China has the US covered 6-ways to Sunday with this currency/trade issue. The article was able to show how the both the currency and trade issues go hand-and-hand. Businesses that have operations in China are wanting to stay the course with the devalued currency and Manufacturing sector is hurting as we try and demand even trade. This leaves us supporting either business or manufacturing - where dose that leave the USA?

Posted by James Blackwell | November 17, 2010 12:02 pm

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