China's Trade Surplus With U.S. Drops, Surges With EU

[M.D. Holloway]

China's Trade Surplus With U.S. Drops, Surges With EU
By Joe McDonald, AP Business Writer
Manufacturing.Net - February 21, 2008


BEIJING (AP) — China's trade surplus with the United States narrowed in January as U.S. demand for Chinese goods weakened, while the surplus with the EU surged by 42 percent, according to data reported Thursday.

The surplus with the United States was US$12.1 billion (euro8.2 billion), down 6.7 percent from the same month last year, the Chinese customs agency reported. The trade surplus with the 27-nation European Union widened to US$13.7 billion (euro9.3 billion).

The data appeared likely to add to pressure on Beijing for faster action on currency and trade barriers. Some American lawmakers are calling for punitive tariffs on Chinese imports if Beijing fails to act.

China's trade surplus — or the amount that exports exceed imports — with the EU has risen sharply in the past year, prompting European officials to join in lobbying Beijing.

On Feb. 15, Xinhua News Agency had said China's global trade gap in January had grown 22.7 percent to US$19.5 billion (euro13.3 billion), citing the customs agency. At that time, it did not break down trade by region.

The United States, European Union and other trading partners accuse Beijing of obstructing imports and foreign investment in violation of free-trading pledges in order to nurture Chinese industries.

A World Trade Organization panel ruled last week that China was improperly using tax policy to discourage automakers from using imported auto parts. The United States, EU and Canada had complained the policy was costing jobs abroad.

China's exporters of clothing, furniture and other goods say American retailers are cutting orders, worried that a possible U.S. recession could reduce consumer spending.

Chinese producers are hoping that higher consumption at home can help to fill the gap. China's economy also is expected expand by at least 9 percent this year, down from last year's stunning 11.4 percent. Beijing is trying to encourage its own consumers to spend more in hopes of reducing reliance on export industries.

Exports to the United States grew by a lackluster 5.4 percent in January, well below the usual double-digit rate, to US$19.2 billion (euro13 billion), according to the General Administration of Customs.

Chinese imports of American goods grew by 12.2 percent to US$7.1 billion (euro4.8 billion), the customs agency said.

The United States and other trading partners complain that Chinese currency controls are partly to blame for the trade gap. They say the country's currency, the yuan, is kept undervalued, giving its exporters an unfair price advantage.

Last year, China's global trade surplus ballooned by nearly 50 percent to US$262.2 billion. The government said the trade gap with the United States rose 19 percent to US$163.3 billion, while that with the EU expanded 46 percent to US$134.3 billion.

The United States says it ran a US$256.3 billion trade deficit with China last year, up 10.2 percent from 2006. The two governments report widely differing trade figures because they collect data differently.

Different definitions...

[frogger]

I make an effort to contribute very little to the US-China trade deficit. It's all I can personally do while we're stuck with the faith-based trade policies of this and the previous administration.

[NICKG]

as the $ decreases in value, that figure is gonna go down..(the deficit) China has artificially link the value of the tuan to the dollar...it is beginning to see problems with the freefall in the dollar. the dollar devaluation is good for us here..even if people don't realize it...long term wise it will bring jobs and industry back and make automakers more competitive globally.

[hardflex]

Here are a couple of interesting statements from an article I found online.

"The dollar remains at least 40 to 50 percent overvalued against the Chinese yuan and other Asian currencies. Although China revalued the yuan from 8.28 to 8.11 in July 2005, and announced it would adjust the currency to a basket of currencies, the yuan continues to track the dollar very closely. Currently, the yuan is trading at 7.19."


and then



Some analysts argue that the trade deficit reflects U.S. economic strength, because foreigners find many promising investments here. The details of U.S. financing belie this argument.

Foreign direct investment in U.S. only comes to about 10 percent of U.S. capital inflows and the remainder of the $712 billion trade deficit must be largely financed by sales of bonds and other securities. The cumulative value of this debt now exceeds $6 trillion and will likely pierce $7 trillion in 2008. The interest payments come to about $2000 for each working American.

Consequences for Economic Growth

High and rising trade deficits tax economic growth. Specifically, each dollar spent on imports that is not matched by a dollar of exports reduces domestic demand and employment, and shifts workers into activities where productivity is lower.