By James McKee
As China continues to enter its next phase of economic evolution they face many struggles including an unstable economy. The amount of money being spent in China is mind boggling, entire cities have been erected and yet they sit vacant due to a population that has not yet caught up to Western nations in terms of income. China is beginning to address these problems at the forefront of its domestic policy in a way that is aggressive and effective. China possesses capital reserves that should see it through any storm it encounters, although it is still very possible that China could encounter a problem large enough to exhaust those reserves and cause problems with the Yuan.
What is encouraging for the Yuan is the fact that China is already being proactive and anticipating possible problems with their economy in the near future. There are growing fears in China resulting from unrest and instability in the Middle East that have brought about growing concern for the possible effects to China therein. The cost of food and housing in China remains exponentially high in light of the fact that Chinese currency is still very much devalued in order to keep China viable as an exporter. The rising prices of necessities in China have already lead to a series of protests throughout the country and could lead to more.
The dilemma for China is very simple and yet extremely volatile, on the one hand there is a need to appreciate the Yuan so that the country can move on and move past its industrial age. The other side of the coin is by appreciating the Yuan millions upon millions of workers would lose their jobs because China would no longer be nearly as lucrative for export. If these people are unemployed the entire country could easily find itself undergoing a massive, bloody revolt. Those on the forex currency exchange should carefully observe the actions of China’s central bank and the value of the Yuan.
About the Author
Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.
