China’s economy remains on the top three largest economies in the world together with the United States and the European Union. It has a population of 1.37 billion people which contributes to its economic growth. It attracts more workers from its sizable proportion of population because of its vast number of factories. More and more manufacturers outside the country outsource labor jobs in China due to its relatively low labor cost. In 2016 alone, the country has produced a staggering amount of $21.27 billion and a GDP of 6.7%.
Their current leader, President Xi Jinping, is planning to strengthen and improve more their financial and economic aspects by opening its markets to more investors abroad. This probes a better relationship with its neighboring countries as well as the United States wherein President Xi Jinping and President Trump are fortifying their relationship and respective nations despite the history that both countries have.
Both imports and exports are huge contributors to China’s economic growth. The country is the third largest importer in the world with $1.4 trillion worth of imports recorded in 2016. It’s the largest importer of aluminum (54%), nickel (50%), and copper (48%). The mining and agricultural businesses are booming around the world due to the country’s commodity consumption. As for exports, it exported $2 trillion worth of goods in 2016. China does several manufacturing services for other countries, especially companies from the United States. With that being said, China is considered as the largest trading partner of the US. Exports to China have increased by approximately 10% since 2008. This impacts the US economy in several ways since exports influence employment, economic growth, and the amount by which the cost of the country’s imports exceeds the value of its exports.
Moreover, China continues to acquire more and more US firms. One of the biggest acquisition to date is the acquirement of Shuanghui International Smithfield Foods (America’s largest pork producer) with a deal amount of $7.1 billion. Other big American companies now owned by Chinese owners are Terex Corporation, Legendary Entertainment Group, and Motorola Mobility. These types of foreign investments bring forth economic benefits for the United States as well as bring more job opportunities to Americans.
How does China manage its currency? It comes from its various exports to the United States which are mainly machinery, electronics, and apparel. As for the American companies, they would send their raw materials to Chinese factories for low assembly cost. After which, the final product will be sent back to the US. Through this way, it makes it more profitable for American companies. Once firms receive dollars as payment, they would deposit these in exchange of yuan (China’s currency) to render payment to the workers. The banks will then deposit the dollars into the People’s Bank of China. These are then kept in their foreign exchange reserves which result in the downsizing of dollars supply accessible for trading, and push down the value of yuan. Moreover, China is considered the biggest foreign holder of US Treasury bills and bonds. This is an advantage for China as it can control its currency value because it can easily sell part of its holdings from the US.
There have been several facts on how China’s economy affects the United States. There have been many accusations rendered by then-presidential candidate Donald Trump about unfair trade practices and currency manipulation by China which greatly impacts his nation. However, it has been reported in Trump-today.news recently that the relationship between these two nations has described as better than ever. Trump may still continue talk tough occasionally, but this new-found friendship between the two countries might spark more positive effects than most people think.