China is rapidly growing its economy, the largest economy in term of purchasing power parity, and its nominal GDP. China is ranked as the largest exporter, and second largest importer all around the world. Inflow of hot money in China had been taken place in 1978
The commencement of prosperity in china creates a tremendous market that significantly taking part in economic progression. China is increasingly playing a vital role in worldwide affairs and moving towards modernization that has a prominent impression all over the world.
The economic growth of China is stiffed by the U.S. The United States became an extremely powerful in the world after the break down of the Soviet Union. During this interval, the policies of China by one of the collaborator to one of obstruction, this was designated as 'engagement'. United States debilitate China's exertion to present the Olympic Games after the cold war between them, and eventually U.S blockade the Chinese ship in cosmopolitan waters, indicated strong disapproval China's human rights record at the United Nation Human Rights Conference continuously, exaggerated arms sales to Taiwan, ordered their aircraft carriers to the Taiwan Straight so that they will oppose the regulation movement of the People's Liberation Army, contravened on China's participation into the World Trade Organization, and inebriated the Chinese embassy in Belgrade.
The Chinese Government believing that United States is helping them and making efforts to prevent China from flourishing greatly so that U.S can All of these made the Chinese Government and its people believe that the United States is attempting to prevent China from growing strong so that the United States can consistently dominating all around the world.
China is aware of United States superpower that U.S can easily create barriers in China's modernization programs. China always tries to evade opposition with the United States. China hopes to develop good relationship with the United States in every discipline. China develops and maintains collaboration with United States in order to avoid future confrontations between them. China not even interested in participation in international leadership with U.S but their strategy to intervene less into U.S domestic affairs (Yan Xuetong, 2001).
China turns US tactics in Asia; China is not only working over their economic growth, but also on its societal growth. They are highly interested in transforming its economy and its society in order to lead all around the world. When China's economy structure started to grow its trade and investment alliances in northeast Asia it caused the huge change in society, economy, politics, and military coordination among different countries in the vicinity (Dick K. Nanto & Emma Chanlett- Avery, 2006).
As far as concern about the import and export China has deranged the US its main trading collaborator. Everyone is running towards China's market which becomes an extensive that all Asian countries are more likely to rely on China's market because of its low cost, and reasonable prices. As U.S is one of the major exporter who exports to Japan, Taiwan, and Korea but now Japan ,Taiwan, and Korea all turn to join China for imports and exports. Every country is rapidly disseminating its manufacturing processes in China in order to take benefit of low costs.
The current policies of U.S for the economic raise in China support Realism and idealism. The military of pentagon has also planned for the worst case scenario and other numerous scenarios if it will be taken place at some bad time. The current policies emphasizes fortuitously on military planning, controlling its exports, and making strong alliances with South Korea and Japan, and making bridge among these countries by rising level of commitment and persistency.
Many of U.S policies are placed worldwide and transforming the economic and political situations of nations. U.S is promoting its ideal democracy, enlightens market economy, and spread the awareness of human emancipation in China.
China conserved a policy in order to secure its currency to the U.S dollar from 1994 till July 21 (2005) at an exchange rate around 8.28 Yuan against the dollar. The central bank of China conserved this security by buying or selling many dollars designated its resources in exchange for more printed Yuan as it was the requirement to annihilate excess of demand and supply. Thus the exchange rate between Yuan and the dollar remained the same, although changes in economic and environmental factors that could have differently stimulate the Yuan to either rise in value or depreciate.
According to the most recent annual statisticians in 2010, that U.S trade deficit with China was $252 billion. It was bit sluggish as compare with 2008 where it was $268 billion; this was the world largest record between any two countries. U.S doubles its export in 2005 and exported $82billion in goods and services to China, on the other hand U.S also bring more desirable improvements in its imports around $ 334 billion. The predictors concluded that U.S trade deficit with china had been taken place because China is competent to produce goods and services at low cost (Wayne M.Morrison & Marc Labonte 2008).
China is strategically moving its economy and set its currency the Yuan make equal amount of currencies that includes the dollar. China buys dollars from U.S treasuries to adhere it when the dollar depreciates its value. This is the better way China maintain its targeted values. China's goods are reasonable in comparison as long as the Yuan is lower than the dollar.
Trade deficit between U.S and china is affecting the U.S economy because the U.S treasuries sell dollars to China so that China will sustain the value of the dollar and keep hold on its exports more cheaply. China is now one of the largest lenders to the U.S government. China possessed $895 billions in 2010 in U.S treasuries. The 32percent of $2.8 trillion was outstanding. China is actually supported by keeping U.S interest rates low by buying their treasuries. If China stops buying U.S treasuries ultimately the interest rate will increase (Kimberly Amadeo, 2011).
