Beijing Puzzle

China is the world’s biggest economy, after the US and Japan, and almost became the world’s biggest exporter when global credit shrank and importing nations abruptly reduced demand. Yet the country still runs a record high trade surplus, as its exports remain competitive with those from South Korea or Taiwan. The Economist reports, “a more worrying reason why China bought less from the rest of the world is that its domestic demand has weakened.” Such economic difficulties, reduced exports and imports, could tempt the Chinese government to lower the value of its currency, which would likewise invite protectionist backlash from the US and others. China’s banking system remains healthy, still providing credit. The Economist insists that one solution can both ease China’s excess in export capacity along with huge global imbalances, and that’s boosting China’s domestic demand. – YaleGlobal

Beijing Puzzle

Why is China's trade surplus still growing when its exports have collapsed?
Wednesday, January 21, 2009

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