Harsh Words & Economic Strains

Related entries: Economy, General, News, Trading

As the Chinese economy joins the general global gloom, trade tensions have been rising. The Washinton Post notes that:

    “U.S. Treasury Secretary Timothy F. Geithner accused China of “manipulating” its currency …The U.S. Trade Representative’s office, in a harshly worded and wide-ranging complaint to the World Trade Organization in December, alleged that China uses cash grants, cheap loans and other subsidies to illegally aid its exporters.

    …China, for its part, has bashed the “Buy America” program embedded in the just-passed stimulus package, calling it “poison to the solution” of the global economic crisis. At the World Economic Forum meeting in Davos three weeks ago, Chinese Premier Wen Jiabao, without naming the United States explicitly, blamed the financial crisis on unsupervised capitalism.”

Xinhua reports that foreign trade is expected to fall dramatically – something that is unlikely to help bring cheer to the conversation:

    “China’s exports would fall 5 percent and imports contract 11.7 percent in 2009 from a year earlier, forecast investment bank Merrill Lynch.

    In January China’s s exports were down 17.5 percent year-on-year and imports were down 43.1 percent. The data was distorted by the timing of the lunar New Year and also showed the effects of the global recession.

    For the first quarter of 2009, the investment bank expects a 7-percent slump in exports and 20-percent decline in imports.

    Trade surplus would increase to 358 billion U.S. dollars this year from 296 billion U.S. dollars in 2008, the bank said.”

The poor trade performance comes together with expectations of a big deficit. According to Reuters:

    “China’s 2009 budget deficit will leap eightfold to 950 billion yuan ($139 billion) under a draft plan which will be put to the National People’s Congress next month, the Economic Observer newspaper reported…

    That deficit, including 200 billion yuan of loans to be issued by China’s regions, would be the biggest in China’s history and amount to around 3 percent of gross domestic product, the paper said, citing informed sources that it did not name.”

Luckily there are at least some nice words emerging, thanks to Hillary Clinton, according to AP…

    “China gave U.S. Secretary of State Hillary Rodham Clinton a glowing review Tuesday following her weekend visit, during which she steered clear of human rights issues and focused instead on matters such as trade and finance.”

And even more nice words…

    “”You look younger and more beautiful than you look on TV,” State Councilor Dai Bingguo told her “

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