China’s trade surplus narrows
Steve Chiotakis: China today said the gap between what it exports and imports shrank last year. The country reported its lowest trade surplus in three years. China’s exports took a big hit in Europe because of the sour economy there — and of course, the debt crisis — and its import growth took an even bigger hit as Chinese consumers bought fewer things last year. What does that mean for the rest of us around the world?
The BBC’s Michael Bristow joins us now from Beijing with the latest on that story. Hey Michael.
Michael Bristow: Hi, how are you doing?
Chiotakis: I’m doing well. What’s going on here?
Bristow: The export growth slowing means that there’s less demand in the United States and in Europe. That’s why that’s slowed. Imports grew slightly because the Chinese economy is slowing slightly so there’s less demand in China for commodities and for products that they buy from abroad. That’s partly because, you know, for example, they need fewer commodities because they’re making fewer goods for exports but also because demand in China is slightly slowing.
So there’s two things at play here. Essentially — with exports — exports are slow because external demand in Europe and America has slowed slightly. The demand for imports has slowed because demand in China is slowing down, the economy is slowing down here because for the last year or so, the government has been trying to slow it down because it fears inflation; it doesn’t want to go too fast. So both those things are happening because of different reasons.
Chiotakis: How does this news, Michael, affect the pressure the U.S. is putting on China to allow its currency, the yuan, to appreciate?
Bristow: Well, there’s still a trade surplus China has with the United States and whilst ever that is the case, I think there’s going to be pressure from the United States and Treasury Secretary Timothy Geithner is in Beijing at the moment. There’s going to be pressure from the United States to allow the yuan to appreciate. Essentially, the argument is that the lower yuan gives Chinese exporters an advantage over American firms and so whenever there’s a trade surplus, that argument will continue.
Chiotakis: The BBC’s Michael Bristow, in Beijing. Michael, thanks.
Bristow: Thank you very much.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.