The more the Chinese can’t afford to export to the US, the more the US will afford manufacturing at home and exporting to other countries. How will that happen? It’s been happening as follows:
With economic growth hitting a three-year low of 7.6 percent in the second quarter, the Chinese government earlier this month approved dozens of infrastructure projects worth more than one trillion yuan in order to buoy the economy. The projects include highways, ports, railways, sewage networks and waste treatment plants.
But the country’s external environment could deteriorate further, as some developed economies, including the United States and Japan, have adopted new easing measures to shore up growth. The moves will likely push up imported inflation, corporate financing costs and the yuan’s value, which will be a blow to export-oriented firms.
Not only are orders dropping, but so are profit margins. The latest round of quantitative easing adopted by the United States will make it worse, ….
A higher currency makes a country’s exports more expensive and imports cheaper in foreign markets; a lower currency makes a country’s exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country’s balance of trade, while a lower exchange rate would increase it.