Report Essay Example | Topics and Well Written Essays - 750 words - 18

Report - Essay Example Instead, global issues of trade control their domestic economy. The trade between China and the United States in the year 2007 was standing at two hundred and six point six billion US dollars, and it declined to one hundred and forty-three billion two years later. This drop was due to the external demand that was shrinking in the wake of the financial crisis that was taking place globally (Kara 71). The United States companies that were operating inside China contributed approximately forty-four percent of these surpluses while other companies contributed about twenty percent. Most of the trade taking place between China and the United States is compensatory that account for almost sixty percent of the total trade between the two countries. Therefore, any slight increase in the Yuan may lead to a significant increase in the Chinese trade surplus, contrary to what is expected. From the yuan appreciation, China has been able to import more raw materials and equipment for its industries at relatively lower prices (Morrison 2013). The year 2005, the first year when the Yuan appreciated, the total value of exports significantly increased. The exports increased by twelve point five billion US dollars in the following year a year which Yuan appreciated by nearly three percent. On the side of importation, recent experiences are shocking for those who are seeking for reduction of the deficit through revaluation of the currency. The evidence that appreciation of Yuan is deterring the consumption of Chinese goods and commodities by the United States is not compelling. During the period when Yuan was strengthening from 2005 to the year 2008, the imports of United States from China shoot up by approximately ninety-four point three billion an equivalent of about four percent. This led to an increased in the inelasticity of prices affecting the consumers in the end. Choices in making the appropriate regime in exchange rates are