The U.S. is the source of most of the political heat generated by China’s foreign exchange policy. But how does that policy affect the developing world

China’s economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy.

Deterioration in the environment – notably air pollution, soil erosion, and the steady fall of the water table, especially in the north – is another long-term problem.

China is also the second largest trading nation in the world and the largest exporter and second largest importer of goods.
The PRC government’s decision to permit China to be used by multinational corporations as an export platform has made the country a major competitor to other Asian export-led economies, such as South Korea, Singapore, and Malaysia.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.

Its mineral resources are probably among the richest in the world but are only partially developed.

The technological level and quality standards of its industry as a whole are still fairly low, notwithstanding a marked change since 2000, spurred in part by foreign investment.

The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.

Globally, foreign investment decreased by almost 40 percent last year amid the financial downturn and is expected to show only marginal growth this year.

“The growth rate (for ODI) in the next few years will be much higher than previous years,” Shen said, without elaborating.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.

Agriculture is by far the leading occupation, involving over 50% of the population, although extensive rough, high terrain and large arid areas – especially in the west and north – limit cultivation to only about 10% of the land surface.

In terms of cash crops, China ranks first in cotton and tobacco and is an important producer of oilseeds, silk, tea, ramie, jute, hemp, sugarcane, and sugar beets.

Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south.

Coal is the most abundant mineral (China ranks first in coal production); high-quality, easily mined coal is found throughout the country, but especially in the north and northeast.

China is among the world’s four top producers of antimony, magnesium, tin, tungsten, and zinc, and ranks second (after the United States) in the production of salt, sixth in gold, and eighth in lead ore.

China’s exploitation of its high-sulfur coal resources has resulted in massive pollution.

The east and northeast are well served by railroads and highways, and there are now major rail and road links with the interior.

More:
Does China’s Forex Policy Beggar Its Neighbors?

Before you begin currency trading you will want to educate yourself on what factors and conditions affect currency rates. The biggest factor went trading currency pairs that affects currency rates is information. If you have come from a background of trading stocks or commodities, you know that information you assimilate on a given commodity or stock can affect the price up and down dramatically in a very short period of time. Currency rates are no different. Information is king in currency trading.

The differences currency trading has its own unique information to consider. There are many factors at play in the currency market at any point in time. At its core, you are looking at information that affects two major international economies and their currency. If you add into the equation other economies worldwide, there is a significant amount of information you should consider.

Currency Rates: Fundamentals and Technical Considerations

Fundamentals are generally news and information that reflects the current status of individual countries whose currencies are being traded. These include interest rate levels, monetary policy, international trade flows, international investment flows and economic data reports. There is also political and geopolitical fundamentals to consider. If political events are occurring in a country, that may undermine the confidence of the people of that nation, then the value of its currency will likely be negatively affected. This is why currency traders pay attention to what is happening politically. Political unrest can quickly turn a profitable trade into a loser. Those are factors beyond your control, except that you can control how closely you monitor those kinds of situations.

Technical analysis most of the time involves chart analysis, mathematical studies, trend line analysis, momentum and moving averages. Almost all currency traders follow technical analysis and their trading. Again, if you have a background as a stock trader you will be very familiar with technical analysis and for the most part the same principles apply.

If you aren’t familiar with technical analysis, you should begin to familiarize yourself with a minimum of a basic understanding. Technical analysis and learning how to use it is another weapon in your arsenal to help you evaluate potential trades. Some traders trade on technical analysis alone.

It’s quite possible that currency rates and the prices they bring has nothing to do with either fundamentals or technical factors. In some cases, market psychology, sentiment and the natural instincts of traders dictate currency rates.

Remember this, the Forex market consist of tens of thousands, maybe hundreds of thousands of different trading philosophies and traders. Supply and demand, in this case the supply and demand being buyers and sellers can influence currency rates as much as anything.

Interpreting and assimilating all this information is just one component of a currency traders daily ritual. You should be disciplined and you should be dedicated if you are going to trade currencies. Anything less than 100% dedication is a surefire recipe for disaster an extensive losses of money.

Gather the information, process the information, and then lay that information against your trading plan before you pull the trigger on a trade. If the information you get does not trigger a trade within your trading plan, you should wait for the next one. There is an old adage that says, Mason a trade is just like missing a bus. There will be another a bus and another trade right around the corner.

Just as there are mistakes that are common in currency trading, there are also habits and principles of successful currency traders. It is said that we learn 70% of what we know with our eyes. As a currency trader you would be wise to watch those around us that are successful, and mirror their strategies as much as it is possible in your own trading plan.

Your Trading Plan

We have written before about the necessity of a trading plan. Failure to execute a viable trading plan is a stepping stone to failure. Successful traders are successful for a reason. No successful currency trader will last very long without a detailed, well conceived, trading plan. Your trading plan will include a specific plan for each position, including an entry point, a stop loss exit, they take profit exit and position size. With those components in place, think for a moment how you would react to market conditions as they present themselves. The answer is you have every potential event covered in the details of your trading plan.

Monitoring Current Events

The Forex trading hours not only present an opportunity to trade almost anytime of the day or night, but our significantly affected by current events. Successful traders are able to monitor current events and look into future events and determine if the market has priced in an expected outcome. At the same time, successful traders can determine what is the likely reaction if the event fails to match expectations. If you are able to build this particular strategy into your trading plan you won’t be left trying to figure out what happened or how you lost money. While others may scramble while the market digest unexpected news, you were prepared if you are monitoring current events and you should have a plan in place to trade the news.

Flexibility

Making money trading currencies is not necessarily about being right and wrong. Successful currency traders are able to resist becoming emotionally attached to a particular position. They are flexible and are able to adapt to current events and news. You must be able to pull the trigger and abandon an open position in the news or events take the market or the pair that you are trading a different direction. While a stop loss as we have discussed will help, your experience in time should be able to tell you it is time to move on. Remain flexible, nothing is written in granite when it comes to currency trading.

Being prepared

If you were to ask any successful businessman or businesswoman what was a key component to their success, their answer would be that they were prepared. Trading currencies is no different. You must be prepared as much as it is possible. Remember the market moves on news and information. You can prepare yourself by reading and forecasting economic data news releases. Find out when central bankers and finance officials will be speaking. Their words are often accompanied by market swings. You should know when central banks set their interest rates or if they are about to change. Remain vigilant and stay aware of time zones in different countries. Unexpected news is a driving force when it comes to currency trading. You should conduct exhaustive research and assimilate as much of this financial data as possible. It is important to note that collecting this data is not a one-time affair. As a currency trader who wants to be successful, you must exercise due diligence on a daily basis. These factors won’t guarantee 100% success, however, they will enhance your chances.