Why is china concerned about the value of us dollar what

Assignment Help Finance Basics
Reference no: EM13617800

"As President Barack Obama prepares to depart Thursday for his first Asia trip, Chinese premier Wen Jiabao is urging the U.S. to keep its deficit to an "appropriate size," a clear message to the leader of the world's largest debtor nation from its largest creditor.

China is the largest holder of U.S. government debt and has invested an estimated 70% of its more than $2 trillion stockpile of foreign-exchange reserves (the world's largest) in dollar assets, Reuters reports. Further dollar weakness, brought on by enormous U.S. deficit spending and near-zero interest rates, would erode the value of China's huge U.S. holdings.

"Most importantly, we hope the United States will keep an appropriate size to its deficit so that there will be basic stability in the exchange rate, and that is conducive to stability and the recovery of the global economy," Wen Jiabao said over the weekend at a news conference in Egypt.

In contrast, the best strategy for the U.S. may be an inflationary stance. We need stimulus spending to jump start our economy and reduce the real value of our record budget deficit of $1.42 trillion in the fiscal year that ended Sept. 30. An improved U.S. economy alsowould mean more Americans buying up Chinese-made goods"
Please comment on the following questions:

Why is China concerned about the value of US dollar? What can they do to decrease their exposure to fluctuations in the value of US dollar? Is decreasing exposure to US dollar an easy task for China? Why?

Reference no: EM13617800

Questions Cloud

What is the difference between speculation and hedging why : what is the difference between speculation and hedging? why do business managers use hedging strategies? des hedging
What is arbitrage in financial markets would you normally : what is arbitrage? in financial markets would you normally expect arbitrage opportunities to exist frequently? why or
There is an induced emf in the circuit causing the bulb to : a pair of parallel conducting rails is separated by 55.0 cm. they are joined at one end by a circuit component
Draw mohrs circle for a point on top of the cross-section : a simply supported beam of length 18 ft. is subjected to a trapezoidally distributed load that has a value of 3 kipft
Why is china concerned about the value of us dollar what : as president barack obama prepares to depart thursday for his first asia trip chinese premier wen jiabao is urging the
What is the potential difference across each capacitor : capacitors c115uf and c223uf are each charged to 10v then disconnected from the battery without changing the charge on
According to this article what is the interdependency : the good news is gamble believes china will continue to buy u.s. treasuries which should come as a relief to those
If we wanted to find out how period and spring constant : if we wanted to find out how period and spring constant relate to each other how would we go about finding the spring
The hole must have a diameter of b 25 mm determine the : the aluminum plate of thickness t 3.5 mm. is to be designed so the maximum stress remains below 100 mpa. the hole must

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd