The United States And China - 1650 Words

The chairman has just requested that you relocate to Shanghai - or face losing your job at the company. Apparently, transferring activities to China provides the firm with the greatest chance to succeed. This in spite of the US branch’s ‘excellent performance’ over the past few months. As expected, you are visibly troubled and wish to relieve some tension for the time being. Unbeknownst to you, the stress ball that you reach for, the water bottle that you sip from and the cut-price pillow you lay your head on were all direct results of the ever so famous ‘Made in China’ Initiative. More and more Americans are becoming familiar with this type of scenario and in every case, the inconsistency underpinning their country’s connection with the†¦show more content†¦Concerning the high Chinese savings rate, several analysts hold the financial sector accountable, noting that the underdeveloped financial system has restricted access to external finance - forcing Chinese firms to internally fund any fixed asset investment with their own retained earnings. However, this is not the only factor attributed; according to Juann Hung and Rong Qian, undervaluation of the yuan also propped up the savings rate by making foreign products relatively more expensive and thereby thwarting import consumption (Hung and Qian, 2010). Despite these theories being the subject of much interest, it is the effect of the savings rate which is most important; China’s rising savings rate meant that a key symptom of its economic expansion during the early twentieth century wa s a significant rise in its quantity of savings. This, in the eyes of leading economists, prompted a situation where excessive savings were pursuing a limited number of investment intentions – commonly referred to as a glut of world savings in post-crisis analysis. Considering the Chinese central bank’s choice to purchase dollar denominated debt in and around the same time (to deliberately undervalue the yuan), it was inevitable that US Treasury yields would fall