Monday, January 16, 2012

China sells to the US, EU, and buys from the rest of the world

China typically responds to criticism about running a large trade surplus by pointing out the decline in their surplus levels. That is in fact true as the nation's total surplus has fallen to 2.2% of its GDP.
WSJ: China's trade surplus fell to $155.14 billion in 2011, down 14.5% from 2010, according to figures from the General Administration of Customs. As a percentage of gross domestic product, a ratio followed by economists, the surplus declined to around 2.2%, based on the International Monetary Fund's forecast for 2011 GDP, from around 3.1% in 2010.
However with respect to the US and the EU, the situation is quite different.  The chart below from Capital Economics shows that the decline in China's surplus is driven by purchases from "the rest of the world" while its surplus with the US and the EU continues to grow.

Source: Capital Economics

Therefore the argument that China is becoming substantially less reliant on exports is invalid. The economic health of both the US and the EU is critical to China's continuing economic expansion. As the eurozone economies slip into recession, China will increasingly rely on the US growth and will fiercely defend its trade status with the US.


SoberLook.com
Related Posts Plugin for WordPress, Blogger...
Bookmark this post:
Scoop.it

*** Please help keep Sober Look going by viewing the following messages from our sponsor: