Trade and Monetary Environment - Paper Example

Trade has become an increasingly essential part of China's general economy. Ideally, the country has used trade as a tool to modernize its economic activities. Due to trade, the Chinese middle class has continued to expand simply because of the boost in employment and economic growth. Trade is essential to China since it helps raise the living standards of its population. As a result, trade has reduced the number of people who suffer from poverty.

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Typically, trade has encouraged China to specialize in manufacturing only those assets that it can be able to fabricate more effectively and at the cheapest forgone alternative. As a result, China can provide these goods and services at an excessive magnitude, thereby enabling additional cost benefits in connection with economies of scale. Conversely, international trade has led to the transfer of technological how between China and other countries. According to Smirnov 2019, China's foreign trade to GDP ratio ranges at 38.25%. The value increases with a small margin of about 0.1% as the year's pass. The data shows the importance of international trade to the economy of China.

Smirnov 2019, maintains that china exported goods worth about $2.37 trillion. Electronic machines are the most exported goods making half of the total exports. Nonetheless, china also exports other products, including computers, broadcasting equipment, and mobile equipment, integrated circuits. Moreover, China also exports metals which are the second-largest variety after the electronics machinery. On the other hand, the country also imports goods from other countries. According to (Smirnov, 2019), China is considered the second-largest importer globally with a record of $1.53 trillion worth of assets all around the world. The imports include mineral products, crude petroleum, machines, and transportation. Fundamentally, China performs its trade activities with different countries including, Saudi Arabia, United Kingdom, United States, Russia, South Korea, Japan, and Angola.

China's government has made efforts to promote exports, thereby stimulating its economy. For instance, China's primary bank inoculated around 83 billion dollars to avoid a cash crunch. It was a way of assuring the shareholders that more squandering and more types of strategical support would prove to be obtainable (Govorova, 2020). This move only shows that there exist trading policies between China and American investors. The city of Beijing is the supervisory center for financial services in China. This is because the headquarters of the financial supervisory jurisdictions and the four primary banks are located in Beijing. The stock exchanges in China are found in shanghai and the city of Shenzhen. Last year, China's stock markets performed excellently because it exceeded the 22% mark making the year 2019 one of its most significant gains since 2013 (Govorova, 2020). In 2020, the exchange rate of China's currency compared to USD is averaged to be 1 USD is equal to 7.071 Chinese Yuan (Govorova, 2020). In the year 2019, the exchange rate was approximated to be around 1 United States dollar was equivalent to 7.0271 Chinese Yuan. As a result, it has made the Chinese yuan to decrease in value against that of the United States dollar. According to (Govorova, 2020), the Chinese Yuan could drastically depreciate because of the market conflict between the United States and China. Technically, China does not have a floating currency meaning that it pegs its currency to that of the United States Dollar. As a result, china faces a strict controlled currency policy by modulating the trading activities. Furthermore, the country tries to manage the day to day movements of the Chinese Yuan on the forex market.

Reference

Govorova, A. (2020). Energy cooperation between the EAEU and China. International Trade And Trade Policy, (4), 135-144. https://doi.org/10.21686/2410-7395-2019-4-135-144

Smirnov, E. (2019). Mechanisms of structural reforming of china's economy in the context of the development of the trade conflict with the USA. International Trade And Trade Policy, (1), 31-44. https://doi.org/10.21686/2410-7395-2019-1-31-44