China Reports Record High Trade Surplus in August
China’s foreign trade partners have been voicing concerns for some time now that an artificially low yuan is giving an ongoing unfair advantage to its exporters and this new data may place increased pressure on China to revalue its currency. While some dispute the value of these concerns, the fact remains that China’s exports are growing, despite local news reports of factories closing. It seems that smaller, inefficient producers are going out of business, while large exporters continue to expand production. Additionally, more Chinese are buying local products, resulting in a decreased demand for imports. Other factors contributing to the trade surplus include a decline in imports of refined oil products now that the Olympic Games are over, falling crude oil prices and the appreciation of the US dollar against other major currencies.
Official statistics show that inflation decreased from 6.3 percent in July to 4.9 percent in August, below the 5.3 percent that economists were predicting. August’s inflation figure is the lowest since June 2007 when inflation registered at 4.4 percent. This is likely to have been influenced by measures taken by Beijing that included price controls of basic food items, raised interest rates and subsidies to farmers to encourage increased production.
Statistics released by China’s Ministry of Commerce showed that US$67.7 percent of foreign direct investment took place in the country during the first eight months of the year, reflecting an increase of 41.6 percent over the comparable period of 2007. This is seen as a vote of confidence in China’s economic potential. However, with the economic downturn hitting Europe, exports to European countries, as well as to the cash-strapped United States, are likely to slow down in the remainder of 2008, which could hamper the phenomenal export growth that China has been enjoying up to now.