China’s exports and imports rose more than expected in November, continuing a string of overachievement by the world’s second largest economy. Exports were up 35% from the same month last year. Imports rose 38%. The trade surplus for the People’s Republic was $22.9 billion.
A reviving economy in developed nations has caused a large increase in the need for Chinese goods compared to last year when the recession was still ongoing. China’s imports were driven by its emerging consumer class and a need for materials to supply the nation’s vast network of factories.
The first thing that politicians in America will do with the figures is to once again call for China to allow the yuan to float at levels dictated by capital markets and not those set by the Chinese central government. The outrage is likely to again fall on deaf ears.
China has learned that it can face down demands for changes in its yuan policy. Its trade balance has been very positive for some time and has been particularly favorable with the US.
Congress has called on the Administration to be harder on China and to redouble its efforts to get the People’s Republic to revalue its currency. China has ignored these demands. Congress has turned out to have no teeth.
Tim Geithner has visited China several times with the yuan’s value as part of his agenda. President Obama has repeatedly raised the problem with Chinese president Hu Jintao. Nothing has come of those conversations.
There was a time six months ago when the US government believed it had the leverage to make China change its mind on the yuan. The Treasury Department came close to labeling China as a “currency manipulator” ,which would have put all sorts of restrictions on its imports. Treasury backed down from the opportunity is April and then again in October.
China will continue to run a trade surplus and as the global recovery grows so will that surplus. Whatever bluff Congress and the Administration made, China successful called it.
Douglas A. McIntyre
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