Posts Tagged ‘Chinese currency’

It is often difficult to speculate on the future of world trade patterns. Things change. There are many factors to consider. What appears to be a possibility in the next several years, however, is a movement away from western trade with China for trade with a country that offers cheaper goods. Perhaps, because of the decrease in the value of Vietnamese Dong relative to the increase in the value of Chinese RMB, we may see more trade with Vietnam and less with China. It is hard to say for certain; but, the consumer market will gravitate toward the cheapest products available. People will naturally move away from investments that show smaller gains.

While the Western economies are rather stagnant over the past several years, the Chinese economy has been making steady gains. The products that the west once got for cheap in China, are slowly becoming more expensive for us to purchase. Many of the goods that were once “ultra cheap”, are now just “cheap”. People who want the cheapest goods around will start asking themselves if trade with other countries, like Vietnam, will be more beneficial to western consumers than trade with China. If the possibility of “ultra cheap” can come from somewhere other than China, the market may naturally find its center there. If trade patterns begin gravitating away from the Chinese market toward the Vietnamese market, there is a likelihood that Chinese growth will slow, consumer goods in the west may get slightly cheaper, and the Vietnamese economy will begin rising.

Economic growth due to trade eventually has a tipping point. When growth leads to higher priced goods, trade patterns will naturally shift to economies that offer more lucrative consumer product possibilities.

It is only a matter of time before the Chinese economy reaches its tipping point and makes way for disinvestment. This disinvestment will eventually lead to a slower growing Chinese economy. Once the Chinese economy begins to decline again, investment will likely return if it offers the cheapest alternative. But one thing appears to be true of the nature of trade: Economic Growth depends on it.

Another factor to bear in mind in this regard is: Who will the west sell its goods to? Is it more beneficial to allow the Chinese economy to continue gains so that the West can sell its products back to it? Or will consumerist ideology allow for such mutual exchange? This is a complex question indeed. One that will surely define politics and economics in the years to come.


Read Full Post »

%d bloggers like this: