Global Finance Rules

China trade surplus vaulted to reach a record $262.2 bn in 2007.upmost 50% from $177.47 bn reported in the previous year according to china’s general Administration of Customs. In 20007, China export climed to 25.7% to $1.22th, while imports rose to 20.8% to $955.8 bn. The buildup of surplus has grown to an unprecedented level now, causing discomfort not just to trading partners but also to the Chinese Authorities. In 204, the country had mere $32 bn or 1.7% GDP in trade surplus, which has grown to account for over one tenth of the GDP now. It recorded jump in the surplus with all of its top three trading partners, The EU 27%,the US 15% and Japan 14%. The move to rein in the export a have , however, to bought little relief to the country as export were lower by 1.5% with import posting a small rise of .9% in 2007.Many expert blame the sluggish domestic demand and strong overseas demand for the widening trade surplus.
Although a showdown in exports in the fourth quarter of the calendar year 2007 raised some hopes that further rise in surplus, which is already stoking fears of inflation, could be checked, continued buoyancy in overseas demand for ‘Made in China’ products has done little to soothe the nerves. Given that , it is no wonder that reducing the surplus remains a top agenda for not just the policy makers of China but also for the government of the economies.
The rising gap between China’s export and imports has extensively been driven n by a growth strategy that has relied no soaring external demand. Sky scraping, saving, and secure investment environment. Many of China’s trading partners have stoutly against China’s control of the renminbi. China’s ability to hold down the value of its currency well below its correct value has resulted in increasing the foreign demand for its products and discouraging domestic consumption of foreign goods, which are unreasonably expensive in China. Moreover , with an undervalued and inflexible exchange rate , China has fenced itself in a trap which result a huge trade surplus and capital account inflows compel domestic monetary expansion, which ends up mostly in over-investment and excessive expansion in industrial production. China’s foreign currency regime lets the nation’s production grow at the quicker pace than its consumption, thanks to its low cost and relatively hyper-competent labor force. A plethora of subsidies and tax rebates uphold the Chinese export and dampen imports of steel, information technology and the other goods.
Since the beginning of this year, China has initiated several policy measures, but this could not make only a slight change in the situation in the export: the export growth remain strong despite the reduction of the export tax rebate rate; the export value remain unchanged despite its impost of the export tariffs; and the export trend continue as usual despite the increase flexibility I the Yuan exchange rate. In fact, the export of some industries with high level of energy consumption and pollution , such as steel, have increased.
Some labor-intensive industries like textile and garments have also become driving force s the growth in surplus.