China's trade surplus was $11.4 billion last month, four times the expected amount of $3 billion. In March, China's reported trade surplus was $140 million.
While Chinese exports grew to almost 30% from last year, imports have declined to roughly 22%. US exporters believe that the undervalued Chinese currency is to blame for such a significant trade gap. Although the Chinese are already appreciating the Yuan, U.S. Treasury Secretary Timothy Geithner wants China to raise the value of the currency at a much faster rate.
Brian Jackson, Senior Strategist at Royal Bank of Canada in Hong Kong, believes that pressure from the US government will convince China that the economy will survive a more rapidly appreciating Yuan. The Yuan has risen over 5% since being released from a two-year peg to the US dollar.
The British Broadcasting Company reported that China might be experiencing a re-balancing of their net exports. Despite their massive trade surplus, China observed a $1.02 billion trade deficit within the first quarter of this year. Du Zhengzheng from Beijing's Bohai Securities believes the trade surplus will continue to contract. A balance in net exports could lead to closer ties with exporters, especially those in the United States.
Easing Trade Rules
China has not shown much concern over the growing US budget deficit. The US and China recently discussed the easing of trade rules for a more productive relationship between the nations. China agreed to allow US companies into areas once forbidden to foreigners, including financial services, auto insurance and government purchases.
China originally wanted its government purchases to come from within China in an effort to increase innovation. By relaxing stringent rules on key economic sectors, China is allowing for a rebalancing of its export surplus while improving the country's image abroad.
Companies from the US and Europe have made many previous complaints due to being shut out of such a huge market. Now American technology and insurance companies can reach a new, booming market. China is home to the largest car market in the world. As China's economy reaches a new balance, America will begin to increase its exports to China, improving overall productivity.
These latest trade talks will help ensure a healthy balance for both nations.
Key Statistics – China’s Economy (source: CIA World Factbook)
- GDP: China's GDP is currently at 10.3%, up from 9.1% in 2009. China's per capita GDP was $7,400 in 2010.
- Export Commodities: China's top exports are machinery, apparel, textiles, iron and steel, and medical equipment. With over $1.5 trillion in exports, China is the second largest exporting nation in the world.
- Export Partners: China exports primarily to the US (20%), Hong Kong (12%), Japan (8.3%), South Korea (4.5%), and Germany (4.2%).
- Import Commodities: China imported $1.3 trillion in 2010. They import mainly machinery, oil and mineral fuels, medical equipment, metal ores, and organic chemicals. China is the third-largest importing country.
- Import Partners: China gets most of its imports from Japan (12.3%), Hong Kong (10%), South Korea (9%), the US (7.6%), and Taiwan (6.8%).
