The Analysis and Countermeasures of US Dollar Exchange Rate on China\'s Import and Export Trade

Year 2023, Volume: 32, 55 - 61, 30.11.2023

Patrik Vıktor Albert Molnar

https://doi.org/10.55549/epess.1412794

Abstract

This paper investigates the intricate relationship between the Chinese exchange rate and the US dollar, particularly amidst a low-growth economic environment and the potential impact on trade dynamics. Set against the backdrop of the 2008 financial crisis, concerns have arisen over China's substantial dollar-denominated debt stock and the possibility of a sell-off that could devalue the US dollar and impact the global economy. As the post-Covid recession is expected to weaken the US dollar, this study aims to explore potential US countermeasures to maintain the currency's strength. The analysis suggests that China should transition from an export-led development strategy to a more domestically focused approach, promoting industrial modernization, implementing strategic economic adjustments, and enhancing the management and regulation of foreign exchange reserves. Active participation in East Asian monetary cooperation and the establishment of a regional monetary system in East Asia are also recommended. The paper highlights the influence of the US dollar exchange rate on China's import and export trade, illustrating how fluctuations in the exchange rate impact trade volumes and different sectors. To mitigate these effects, China should concentrate on developing advanced industries, modernizing traditional sectors, accelerating new urbanization, and stimulating domestic consumption. Additionally, the government should optimize the external trade services system by reducing burdens on enterprises, deepening tariff facilitation reforms, and supporting small and medium-sized enterprises. In conclusion, comprehending the complex relationship between the Chinese exchange rate and the US dollar is crucial for maintaining global trade stability. Implementing the recommended countermeasures can assist both countries in overcoming economic challenges and fostering mutually beneficial trade relations. By carefully navigating the dynamics between these two currencies, governments can strengthen their economies and contribute to a more stable and prosperous global trade environment.

Keywords

Us-China relations, Exchange rate policy, Pegged exchange rate, Chinese Yuan, Exports

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