Please, write a discussion post about the Topic/Statement below (200 words) and respond to the two classmate discussion posts (150 words each).
Topic/Statement: If cu
ent trends continue, China may be the world's largest economy by 2030. In a concise and well-noted statement, discuss the possible implicators for a) the world's trading system, b) the world's monetary and cu
ency exchange systems, and c) global commodity systems.
(1 or 2 Citations needed for this discussion post)
Classmate discussion posts: (Please, the responses need to be a discussion, not an evaluation. You can agree with them and add new information regarding the topic in discussion. No citation required for classmates responses)
Discussion 1:
Andrew Welfel
China’s growth in the rankings of the world’s economy is an indicator of global economic growth as a whole as well. The ranking is determined by GDP, which is the product of population and production. As Colvin XXXXXXXXXXpointed out, once production capabilities increase for populous nations, the GDP rankings will closely reflect population rankings. This would mean that production is increasing everywhere.
This growth in production, combined with global investment and increased global trade, will result in lower prices and raising more of the world population out of poverty (Hill, 2018, p. 24).
Before diving into the specifics of the discussion question, it is imperative to note that China’s growth means nothing if it was not willing to internationalize its market.
One of the bigger developments in China’s emergence was its joining of the World Trade Organization (or WTO) in 2001. China’s trade numbers jumped dramatically, to the point that China was responsible for 10% of global trade by 2014. As the world’s leading economic power in 2030, this number will be even higher. And in 2015, when China’s demand for imports fell 15%, countries both dependent and not dependent on Chinese imports felt that impact (Best, 2018). As an even greater trader and economic power (potentially), in 2030, this impact will also be more drastic. China’s supply and demand tendencies will spill over and affect other parts of the world.
One of the ways that China controls the price of its exports is by manipulating the value of the Yuan (Amadeo, 2019). China is able to do this because its central government controls banks and businesses. It keeps the Yuan within a relative value of the U.S. dollar so that exports are always priced to specific point. Because China is such an economic power, it affects investors and cu
encies through this practice. For example, The Dow dropped 1,000 points in January of 2016 when China manipulated the Yuan to drop in value (Amadeo, 2019). China has such a reserve of Yuan and dollar bills and such control over them, it can manipulate cu
ency values. As China rises to economic power, this control will increase even more, and potentially against more cu
encies. China will be able to manipulate many cu
encies throughout the world as it grows in economic power and influence.
According to He (2017), China is opening crude oil and agricultural commodity options. As one of the biggest commodity importers in the world, it can set prices and express its views. China’s say in commodities will have a much larger impact as the world’s biggest economy. One of China’s cu
ent issues with commodity pricing is that its own commodity market is highly speculative. Once China expands and deals with commodities on a global level, it will be the frontrunner in determining pricing structures for the global commodity system.
References
Amadeo, Kimberly. (2019) How China Influences the U.S. Dollar. Retrieved from https:
www.thebalance.com/how-does-china-influence-the-u-s-dollar XXXXXXXXXX
Best, Richard. (2018). 4 Ways China Influenced Global Economics in 2016. Retrieved from https:
www.investopedia.com/articles/investing/012816/4-ways-china-influences-global-economics.asp
Colvin, Geoff. (2017). Study: China will Overtake the U.S. as World’s Largest Economy Before 2030. Retrieved from https:
fortune.com/2017/02/09/study-china-will-overtake-the-u-s-as-worlds-largest-economy-before-2030
Hill, C.W. (2018). International Business: Competing in the Global Marketplace (12th ed.). New York, NY: McGraw Hill Education.
He, Laura. (2017). China Urged to Play Bigger Role in Setting Global Commodity Prices. Retrieved from https:
www.scmp.com
usiness/markets/article/2080537/china-urged-play-bigger-role-setting-global-commodity-prices
Discussion 2:
De
ick Williams
China is one of the world’s fastest-growing economies. The country’s tremendous growth can be attributed to its open-border policy, economic reforms, and trade liberalization. Since 2018, China has been recording a real annual gross domestic product (GDP) growth hat averages 9.5 percent, a rate described by World Bank as the ‘fastest sustained expansion by a major economy in history. Such growth has allowed China to double its GDP every eight years and support it to raise approximately 800 million people out of poverty. China’s possibility of becoming the world’s greatest economy will have significant impacts on the world’s monetary, trading, and commodity system.
Implications on the World Trading System
China’s ascension to the greatest economy in the world will increase the overall world trade volume, making the world trade bigger and freer. Being a WTO member state, China will not just open up more of its markets to foreign commodities, but it will also be able to export more through improvements in the external business environment and the development of its economic and export capacity (Zeng & Liang, XXXXXXXXXXAdditionally, China’s growth to a leading economy will affect the equili
ium of the world market, including the world economic system. If China opens more and more of its market, developing countries will do the same, a situation that may increase the bargaining power of developing countries in the world trading system.
Implications on World Monetary and Cu
ency Exchange System
China’s phenomenal growth as an emerging market economy will significantly affect the world monetary and cu
ency exchange system. Ever since China’s economic growth surged, the People’s Bank of China has been devaluing the Yan. China’s cu
ency has been appreciating against the US dollar (Popkova, XXXXXXXXXXSuch devaluation programs will significantly boost China’s exports in support of the economy. The continuous improvement in the value of Yuan against dollar and sterling pounds will affect the American stock market and investors. The US Dow Jones Industrial Average, the S&P, and European and Latin American markets are projected to fall in response to an increase in the value of yuan. For developing countries such as India, a weaker yuan will potentially have implications on their economy (Popkova, XXXXXXXXXXConsequently, China’s decision to devalue yuan against the dollar will increase demand for dollars across the world, including in India, where investors will
ing into the safety of the greenback at the expense of the rupee.
Implications on Global Commodity System
The continued development of China to the status of a leading global economy will have significant impacts on the global commodity system. China dominates most of the world’s commodity markets (Coates & Luu, XXXXXXXXXXThe country’s demand for commodities has increased phenomenally in the period leading to the Global Financial Crisis. The rapid pace of economic progress and processes of industrialization, u
anization and increasing per capita income, will make China the leading commodity consumer, especially in metals and energy (Coates & Luu, XXXXXXXXXXThis situation may potentially increase the demand for world commodity, thereby increasing their overall prices.
References:
Coates, B., & Luu, N XXXXXXXXXXChina's emergence in global commodity markets. Economic Round-up, (1), 1.
Popkova, E. G. (Ed XXXXXXXXXXThe future of the global financial system: Downfall or Harmony (Vol. 57). Springer.
Zeng, K., & Liang, W. (Eds XXXXXXXXXXChina and global trade governance: China's first decade in the World Trade Organization. London: Routledge.