Chinese Yuan

China Battles To Curb Inflation That Threatens Global Growth

Cash reserves at the biggest Chinese banks must increase for the fourth time this year, the nation’s central bank said Sunday. China, which has gotten the world accustomed to paying little for its goods, would send shock waves globally with a severe spike in domestic production costs. Donald Trump, who threatens to run for president, has suggested slapping a 25 percent tariff on Chinese imports, which has attracted detractors who know something about economics. Post resource – China struggles to curb inflation that threatens global growth by MoneyBlogNewz.

Economy isn’t growing the way the government wants

By requiring that banks once again raise their deposit reserve ratio, China’s central bank has been attempting to cool down the nation’s overheating economy by raising interest rates and reducing the amount of money accessible for loans. The reason for the announcement seems to be from the report on China’s economy. It is growing at the fastest rate in the world at 9.7 percent every year. The economy growing has produced inflation. The Chinese government does not like that. Most Chinese citizens are now unable to purchase homes while food and gas costs are very high. Chinese corporations were told not to raise prices by Beijing while agricultural subsidies increased to stop the price increases. The government has also elevated wages, which has contributed to China’s mounting rising prices issue.

China rising prices a global threat

In China, the economic growth has come from the huge inflammatory government spending. It has meant billions of dollars in projects being spent. An inflation rate of 5 percent is possible in the future for China, even with the government attempting to stop. China’s spot for manufactured goods could very well change, depending on this inflation. For things shipped overseas, companies are starting to want more because of the increase in Chinese wages and production. The United States and Europe won’t buy from these corporations with more expensive things. Instead, other countries will be looked to. Should the Chinese economy contract, U.S. multinational companies for instance General Electric and General Motors, which have tied most of their growth to the Chinese market, could suffer significant setbacks.

Trump’s tariff: a trade war nobody wins

China has failed to stop the economy from overheating. Now, the pressure to have the yuan to rise in value is coming down even harder than ever on Beijing. Donald Trump, posturing for a possible GOP presidential bid, is pushing a 25 percent tariff on Chinese imports. Most suggest this is a bad idea. Tariffs aren’t the right answer. A tariff put in place by trump would simply start a trade war. Neither China nor the U.S. could ever win that. A 25 percent tariff would make Chinese goods American consumers depend on more expensive, feeding U.S. inflation. The United States may not be able to trade with the United States anymore if China got mad about this. More than likely, the tariff wouldn’t last long. An Appeal to the World Trade Organization would take care of that.

Information from

New York Times

nytimes.com/2011/04/18/business/global/18yuan.html?_r=1&emc=eta1

Associated Press

money.msn.com/business-news/article.aspx?feed=AP&date=20110418&id=13322016

CNN Money

money.cnn.com/2011/04/17/news/economy/trump_china_trade_war/index.htm

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