China’s trade surplus narrowed by 63%
After many years of eye-popping increases in exports (to over $1 trillion), economic growth and foreign exchange reserves, China’s trade surplus has narrowed sharply — by 63% — in 2008. Meanwhile, domestic inflation continues to soar. AP:
China’s trade surplus in February totaled $8.6 billion, down from $23.7 billion in February 2007, the customs agency reported…The 63% drop in the trade gap from the year-earlier period reflected the impact of a U.S. slowdown while China’s own expansion has stayed robust, driving demand for imported energy, consumer goods and industrial equipment…
China’s imports in February surged 35% to $78.8 billion from the year-earlier period, according to the customs agency. Exports grew by 6.5% to US$87.4 billion — a much slower growth rate than January’s 26%…
Consumer inflation rose to 7.1% in January, its highest level in 11 years. Economists expect February’s inflation rate, due to be reported Tuesday, to rise as high as 8.5%…The cost of basic oil products jumped 37.5% jump in February while that for steel products was up 29.6 percent, the statistics bureau said. Food-related raw materials rose 11%…
State-set prices of gasoline, electric power and some other consumer necessities were frozen in September. In January, food producers were ordered to get official approval for any price increases. Fertilizer prices also have been frozen to protect farmers. But steel mills, factories and other producers must pay market prices for coal, iron ore and other raw materials. Economists have warned that leaving price controls in place too long could add to inflation pressures…
Meanwhile, fixed asset investment in China rose another 25% last year, continuing a string of such increases, while money supply increased 18%. If export growth continues to falter (due to economic conditions in the West) in a country which is 70% dependent on exports for its growth, China might well find itself with a case of stagflation, or other similar economic distress. In any event, the current slowdown in China’s trade surplus marks a decided change from many years of astounding growth statistics, and so this break in a long trendline certainly bears watching.