Sunday, April 11, 2010
China Reports Rare Monthly Trade Deficit
In midst of reports that U.S. and Chinese officials are close to striking a deal that would see a 2% to 3% rise in the Chinese yuan in an effort to make U.S. goods more competitive versus Chinese exports, China reported its first monthly trade deficit in six years. In March, China posted a $7.24 billion trade deficit, its first since April 2004 where they posted $2.26 billion deficit. However, this comes to no surprise as China's trade surplus has continued to diminish since 2010 began.
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For the first time in recent 6 years China has a trade deficit. This sounds surprising, but it is actually a result of China’s decline export of labor-intensive goods and soaring imports. The trade surplus has been falling since the beginning of 2010. If the Chinese currency keeps appreciating, the trade deficit will increase, because imports are less expensive to Chinese people and more people are willing to buy imported products.
ReplyDeleteThe reason for this is partly due to the drawback of China's current economic system. The majority of the treasure is held by the nation and the residents do not hold enough money for consumption. Therefore, when consumption from abroad shrinks, a large amount of surplus good remains in China and cannot be consumed domestically.
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