The economic environment of China and Canada

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Discussion Overview

The discussion revolves around the economic environments of China and Canada, focusing on inflation, currency exchange rates, trade surpluses, and monetary policy. Participants explore the implications of currency appreciation in China and the economic outlook in Canada, incorporating various perspectives and questions related to these topics.

Discussion Character

  • Exploratory
  • Debate/contested
  • Technical explanation

Main Points Raised

  • One participant suggests that China is experiencing significant inflation due to an undervalued currency exchange rate, raising questions about the effects of a potential appreciation of the RMB on inflation and unemployment.
  • Another participant notes that Canada has a lower trade surplus compared to the US, with concerns about a possible double dip recession despite signs of recovery.
  • There is a mention of the Bank of Canada's monetary policy, specifically the decision to maintain low interest rates to increase money demand.
  • Some participants express curiosity about the implications of Japan purchasing European bonds in relation to China's economic strategy.
  • Clarifications are made regarding the terminology used to describe the Canadian dollar's exchange rate with the US dollar, with participants discussing the phrase "loonie flirts with parity."
  • One participant emphasizes that China has been focused on maximizing factory output and acquiring foreign currency for reinvestment, suggesting a long-term strategy regarding currency valuation.

Areas of Agreement / Disagreement

Participants have not reached a consensus on the implications of currency appreciation in China or the overall economic outlook for Canada. Multiple competing views and questions remain unresolved.

Contextual Notes

There are limitations in the discussion regarding assumptions about the relationship between currency valuation and inflation, as well as the specific economic conditions in both countries. The discussion also reflects varying levels of understanding and terminology among participants.

Who May Find This Useful

This discussion may be of interest to students and professionals in economics, international trade, and monetary policy, as well as those following the economic developments in China and Canada.

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.