Wednesday, July 14, 2010

China Export Surge Heightens Risk of Trade Friction

(DNA – Venkatesan Vembu)

China exports surged in June, widening a trade surplus that critics say fuels global imbalances and increasing the risk of trade friction with the U.S.

Exports grew 43.9% year-on-year in June, on top of a breathtaking 48.5% growth in May; at the same time, import growth slowed to 34.1% y-o-y from 48.3% in May. As a result, China’s trade surplus widened to $20 billion in June, against $19.5 in May.

Some economists believe the latest trade data is bad news for the prescribed effort to rebalance global economic growth and trade balances. “China’s strong export data adds to global imbalances,” points out RBS chief China economist Ben Simpfendorfer. “The fact that both China’s exports to the U.S. and its exports of steel are accelerating is a recipe for worsening trade protectionism, especially ahead of U.S. mid-term elections.” It would additionally fuel criticism of China’s management of its currency, the renminbi. Read more here.