The economic environment of China and Canada

AI Thread Summary
China is currently facing significant inflation due to its government maintaining an undervalued currency, which results in a trade surplus. An appreciation of the RMB could reduce inflation but may also lead to lower output and higher unemployment, as suggested by the Phillips curve. In contrast, Canada has a lower trade surplus compared to the US, with the Canadian dollar nearing parity with the US dollar, leading to local pessimism about economic recovery. The Bank of Canada is maintaining low interest rates to stimulate money demand despite concerns of a potential double-dip recession. Overall, the discussion highlights the interconnectedness of currency valuation and economic strategies in both countries.
anuse10
Hi folks, I am a first year MBA student taking an Economics course. My colleagues and I are having trouble learning by just poring over books, so instead I change my learning process by facilitating discussion online, incorporating business knowledge to my daily life.

China, in my preception, is experiencing a significant inflation as the government is maintaing an undervalued currency exchange rate. A low exchange rate results in a hefty trade surplus. What if there is an appreciation of RMB? My professor said such appreciation would push down inflation and according to Philip's curve, would spur a tepid output and heighten unemployment. Why would the appreciation of dollars push down inflation?

Canada, when compared to US, has a lower trade surplus as the loonie is firting greenback with parity. Despite a sign of recovery after the recession in 2010, locals are pessemistic about the outlook of the economy. Some analysts even note that there would be a double dip recession.Bank of Canada governor, Mark Carney, still carry out the monetary policy of increasing money demand by holding interest rate to as low as 1%.

My professor pointed out that Japan did a China a favor by purchasing European bonds. How did that happen?
 
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Welcome to PF anuse10. You've presented several different topics. What would you like to focus on - China or Canada?
 
The China issue seems to be more interesting. Please make any comments as you wish.

The question begged by my professor is quite challenging. Hope someone can shed light on it.
 
anuse10 said:
Hi folks,

...


as the loonie is firting greenback with parity.

Hello anuse10,

Where are you from? I'm having a bit of trouble understanding you. But it looks like something Woolie would say, so I'm guessing England.
 
I am from Hong Kong and am studying in Toronto, Canada. Perhaps I make it wrong and should put it as "Loonie flirts parity with US greenback". I learned that expression from TorontoStar.

What I mean in that clause is that the currency of Canadian dollar is rising against US dollar. Please correct me if I am wrong.

I am curious where you are from? :)
 
anuse10 said:
I am from Hong Kong and am studying in Toronto, Canada. Perhaps I make it wrong and should put it as "Loonie flirts parity with US greenback". I learned that expression from TorontoStar.

What I mean in that clause is that the currency of Canadian dollar is rising against US dollar. Please correct me if I am wrong.

I am curious where you are from? :)

Interesting connections to Britannia you have there.

But this is getting too GD, so let me try and get myself back on track:

Who is the Loonie that the TorontoStar was referring?

I am from Portland http://en.wikipedia.org/wiki/Oregon_Country" , USA.
 
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We are so close to each other eh? Sometimes we call Canadian dollar lonnie.

You know what? We should be discussing the US-Canadian economy as it is closely tied to our daily life LoL
 
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anuse10 said:
China, in my preception, is experiencing a significant inflation as the government is maintaing an undervalued currency exchange rate. A low exchange rate results in a hefty trade surplus. What if there is an appreciation of RMB? My professor said such appreciation would push down inflation and according to Philip's curve, would spur a tepid output and heighten unemployment. Why would the appreciation of dollars push down inflation?

China has been positioned for more than a decade to gain factory orders - that is maximize factory output to increase exports - and acquire foreign currency. This foreign currency has been reinvested broadly and includes natural resources, R&D, and to purchase US securities.

China operates on a long term strategy basis - they will probably not address their currency valuation until their plan is met or possibly as a short term adjustment to circumstances.
 

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