Showing posts from August, 2015

Currency Manipulation subsidy!

Chinese foreign exchange reserves stand at $3.65 trillion. US foreign exchange reserves stand at $113 bn! Chinese debt stands at ~$5.2 trillion. US debt is ~$18.3 trillion! Yet, China choses to devalue its currency by more than 2% w.r.t USD! The devaluation raises some questions. The WTO norms seek for gradual removal of subsidies and also the other economic barriers surrounding any trade between nations. But isn’t the currency devaluation a form of subsidy being extended by the Chinese Govt. to its industries. Subsidies are generally extended in the form of tax exemptions, lower credit or moratorium periods or relaxed accounting guidelines. But an exchange based subsidy (Currency manipulation subsidy) is something that the Chinese Govt. is exploring, if not the first time, to its full potential. Why Can’t other countries chose to do so. Because most of the other countries have a mix of imports and exports and by de-valuating their currencies they are risking the increase in imports …