FOREX Focus: The Chinese Economy and Yuan
Time Magazine, in several issues, has covered China and its tremendous development. A quick browse in the internet will reveal that Time has sixty-one (61) cover titles devoted to China in its contemporary history. International economy is at focus with this large country that has popularized the terms Great Wall, dynasties, Confucianism, and Maoism in popular language. And the reason? China can produce more at less cost. Their more than a billion-population has produced cheaper labor costs. And with China's developed industries, their economy and products have practically invaded every market in the world. But that is not all; foreign multinational corporations are finding it hard to penetrate this great East Asian country.
In the third quarter of this year, it was reported that Chinese trade surplus has hit a record high. It posted a trade surplus of 18.8 billion US dollars; equal to fifty-seven percent increase for a year's gross. In addition to this, the Chinese government has moved to strengthen the yuan by ordering lenders to increase their foreign currency deposits in the central bank. Now, that's a caution for market traders, but a benefit to foreign exchange traders banking on the Chinese yuan.
Looks like China has mastered the craft in strengthening its currency and increasing its value in forex. In the traditional sense, the two key aspects for the balance of supply and demand for exchange rates are the overall strength of the economy and the interest rates. China has indeed improved on its general economy and is very lively over its import and exports. As such, many traders are now shifting to the yuan to ride on the profits.
As for its trade relations with the United States, China regards the US as its second largest trading partner, while the US has China as its third largest trade partner. American corporations have some due caution with regard to the Chinese market for goods and products. They fear that they may lose their market.
Recently, China Vice Commerce Minister Liao Xiaoqui announced that "buying Chinese goods saves Americans 100 billion US dollars in a year." Now that is an amazing assertion. A report said that in a span of ten years, the low-priced quality products of China have enabled Americans to save a total of 600 billion US dollars. This is aside from the fact that four to eight million jobs were created for the United States by the China.
Now that China has indeed penetrated foreign markets, the yuan has indeed become a major currency for trade. The next big thing that is expected to happen is for the Chinese market to be penetrated. That will bring the life of forex to greater heights.