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Are the Forces That Influence China's Trade Surplus Over U.S. Actualy Good For Both Countries?

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ARE THE FORCES THAT INFLUENCE CHINA’S TRADE SURPLUS OVER U.S. ACTUALLY GOOD FOR BOTH COUNTRIES? INTRODUCTION Over the last two decades, China has been increasing its trade surplus. To run into a surplus mean that the amount of goods a country exports is far less than its imports. According to the World Bank (2010), China reported a surplus in the balance of trade equivalent to $US 1.7 Billion in April of 2010. Furthermore, before the financial crisis, the Chinese economy had a record from 2006 to 2008 with the fastest-rising Gross Domestic Product (GDP) in 11 years. The effect of this enormous growth has captured world attention, due to the fact that the large trade surplus China is with U.S has been leading to several issues in both …show more content…

China’s monthly trade balance trend is clear; from 2004 China´s surplus was increasing rapidly, the peak was reached in 2008 before the financial crisis started. Many economist and experts in world trade have been carrying out studies in order to understand the real influence of the forces creating the China- U.S bilateral trade surplus. Morrison (2009, pp 2) as well as Lardy (2008, pp 12) are concerned about how the Chinese government is overcoming the current global crisis by the manipulation of its currency. In addition, another fundamental cause of China trade surplus with U.S is the Chinese excess savings (ART 9 PP 5, ART 7 PP9) 1. Exchange rate manipulation ´´Currency manipulation is the cause of the U.S. trade deficit with China´´ (Geithner, 2009 p8, Morrison 2009, p3, Feenstra 2006, p29 ) is one of the most common claims that economists make when regarding the current trade relationship between U.S. and China. Although several economic policy reforms have contributed to the management of the RMB (Chinese currency), the statement ´´ the larger China’s external surplus is, the more undervalued is the Yuan´´ established by Zhe (2007 p11) seems to clarify that China´s currency is being manipulated by the government. This kind these strategies in order to enhance its competitiveness. This currency manipulation is becoming a difficulty for U.S and China´s

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