Trade Surplus: Still Rising

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US-China trade is talk of the town following the news that the US is making a policy shift to introduce tariffs on some Chinese imports (see more here). While the decision may come as much from political pressure as from economic reality, it does turn up the heat on China’s trade surplus. The latest figures add still more fuel to the fire. People’s Daily reports that:

    “In 2006, China recorded a sizzling economic growth of just under 11 per cent, largely powered by strong exports that rose by 27 percent to 969 billion U.S. dollars. The soaring exports expanded China’s trade surplus to a record 178 billion dollars, up 74 per cent from the previous record of 102 billion dollars set in 2005.

    The astonishing momentum lasted until February 2007, when China chalked up a surplus of almost 24 billion U.S. dollars, a growth of nearly 50 percent month-on-month and a record for February. The trade surplus for the first two months of this year amounted to almost 40 billion dollars, around 28 billion dollars higher than the same period last year. This exceeded the surplus for the first quarter of last year and amounted to 22 percent of the 2006 total. “

And what of the future? China Knowledge carries a report of an Asian Development Bank estimate that China’s trade surplus will grow to over US$250 billion a year by 2008. With these figures being bandied about, the Chinese government is keen to be seen to make that change happen. On this front, BusinessWeek notes that:

    “China has drafted a plan to buy US$12.5 billion (euro9.4 billion) worth of U.S. goods including electronics and soybeans…in a possible effort to ease tensions ahead of a high-level meeting on trade disputes.”

But it is not just one-off measures that are being considered, as People’s Daily is keen to point out:

    “China will strive to reduce its “excessively large” trade surplus to ensure sustained development of both the domestic economy and foreign trade this year, according to Chinese officials…Commerce Minister Bo Xilai told Xinhua that, “The Chinese government does not pursue an excessive trade surplus.” Bo then went on to say how his department has put cutting China’s massive trade surplus as their “priority task of 2007.””

As for the implications for the (still-rising) RMB, Morgan Stanley chief economist Stephen S. Roach is quoted by people’s Daily as saying:

    “…the trade imbalance between China and the United States cannot be solved by relying solely on appreciation of the Chinese currency”

There is also a reminder that much of the trade surplus stems from exports of goods by foreign companies manufacturing in China – and that the potential for the US to balance its deficit is hampered by tight restrictions on high-tech exports (which recently resulted in a record US$100 m fine for ITT).

We can expect the political heat in the US to rise at least as fast as the Chinese trade figures. But whether or not this will lead to a meltdown in trade relations remains to be seen.

See news sources:

    Import policies to have impact on China trade
    Financial Express, India – Mar 26, 2007
    Separately, Mei Xinyu, an economist with the commerce ministry, said China would continue to run a trade surplus for the foreseeable future even if global …

    China said to buy $12.5B in US goods
    BusinessWeek – USA
    China has drafted a plan to buy US$12.5 billion (euro9.4 billion) worth of US goods including electronics and soybeans, a news report said Monday, …

    China’s trade surplus to top US$250 bln by 2008 – ADB
    China Knowledge Online – Singapore
    28, 2007 (China Knowledge) – China’s trade surplus could grow beyond US$250 billion a year by 2008 as its economic growth eases slightly but stays near 9%, …

    China set to balance trade amid soaring surplus
    People’s Daily Online, China – Mar 17, 2007
    The soaring exports expanded China’s trade surplus to a record 178 billion dollars, up 74 per cent from the previous record of 102 billion dollars set in …

    ITT Fined $100M for Tech Transfer to China – USA
    (ITT) was fined $100 million — the largest penalty ever under technology export laws — for releasing its night-vision technology secrets to China, …

One Response to “Trade Surplus: Still Rising”

  1. Archive » Trade Surplus Jumps Again| China Business Blog Says:

    […] y Where is China’s trade surplus heading? Up, of course! The latest figures, despite China’s efforts (reported in the FT), show that: “China recorded a surplus of $16 […]

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