labels: economy - general
China global trade surplus records new highnews
11 September 2006

China''s trade surplus with the rest of the world reached a record $18.8 billion (£10 billion) in August, up from July''s $14.6 billion record. This brings China''s 2006 global trade surplus toll date to $95.6 billion.

The figures were released by Xinhua, China''s official news agency, though export and import figures are yet to be released. According to economists and China''s trading partners, particularly the US, China has notched major trade account surpluses with its trading partners by keeping its currency, the Yuan low to boost exports.

US trade figures suggest that the growing trade imbalance with the United States is a major factor with China''s constant foreign trade surplus. The US is likely to step up its pressure on China to let the Yuan rise.

It points out that the Yuan has risen by less than 2 per cent since being revalued in July 2005 after being tied to the dollar. China has indicated that it would adjust its money supply and credit and take comprehensive measures to mop up liquidity in the banking system.

Since April, China has raised interest rates twice, as well as demanding higher reserves for banks, in a move to control the expanding economy and stem inflation.

China''s currency and its trade surplus are expected to be key issues at the forthcoming World Bank and International Monetary Fund annual meeting due this week in Singapore to address imbalances in the global economy.

China is right now the fourth largest economy. Its GDP and foreign exchange figures are all surging ahead. The main focus of the World Economic Forum and the China Business Summit is on sustainable growth through innovation. The underlying message of the meet is how China''s growth model needs to reinvent itself.

The Indian IT engagement with China, though, is still very limited. The Indian IT companies cater to MNC clients in China. But the Indian manufacturing business in China has been successful. The manufacturing company, Bharat Forge runs a joint venture with the Faw Group in China. The joint venture has a manufacturing facility in north China.

However, the roadblock going ahead for China is the lack of a good human talent pool. Many Chinese sectors suffer from overcapacity due to excessive investment. The potential credit history is bad in several key sectors. The Chinese industry is excessively dependent on foreign investments.


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China global trade surplus records new high