Foreign Exchange rate is determined by Demand & Supply

Washington Post, March 12, 2010 page A12:

President Obama singled out China, saying that a change in the value of its currency was a central step in rebalancing a situation in which the United States served as the consumer engine for the entire world, racking up large trade deficits as a result. China, by contrast, accumulated large trade surpluses that Obama said should now be used to expand domestic consumption, and increase the products it imports from countries such as the United States. Such is the issue of issues for open discussions from all thinkers in the world.

It is known that China is buying products from the United States especially high tech equipments that China wants for technological updating for development. Would US be willing to sell to China to improve the balance of trade? American consumers are benefited by the low cost of products from China as seen in stores in USA. If RMB,the Chinese currency is valued upward,American consumers have to pay more thereby causing more hardship for the jobless folks during the global financial crisis. Moreover,if China sells less resulting economic slowdown thereby affecting fragile global economy leading to a difficult period for economic recovery. China's economists(leaders) would make assessment of policy for China's situations and American leaders would see fit to make policy changes for America such as the health care policy et al.

Francis Shieh a.k.a. Xie Shihao expressing my personal thoughts in the blog as a lifelong student of economics since early 1940s and looking forward to learn from other netizens apropos of constructive Sino-American economics for the benefit of both nations.

Friday,March 12, 2010 at 9.40 a.m.