By Floyd Norris
International Herald Tribune
The great Chinese export machine is producing rising trade surpluses with the United States and soaring surpluses with Europe. But when it comes to the rest of the world, it is running a trade deficit.
China reported this week that its overall monthly trade surplus rose sharply in May, leaving it with a 12-month surplus of $216 billion, the most ever. To put that surplus in perspective, a decade ago it exported only $165 billion in goods, and the surplus came to just $26 billion.
Those figures may considerably understate the real numbers. Chinese statistics show surpluses with individual countries far smaller than those shown by figures released by China's trade partners. For 2005, the U.S. Treasury reported this week, the total deficits reported by all of China's trade partners came to $423 billion, while China reported a surplus of only $117 billion.
The American report concluded that most, but not all, of the discrepancy could be explained by two factors.
First, China, like most other countries, includes the cost of shipping and insurance in their import figures, but not in exports.
Second, many exports to Hong Kong are re-exported to other countries, and show up as Chinese imports in those countries' figures.
But whatever the absolute level of the Chinese surplus, there is no doubt it has been rising, and that its growth is now accelerating. Early in this decade, Chinese figures showed Europe with only a small trade deficit, but now that deficit is growing more rapidly than the one with the United States.
The charts show 12-month totals for Chinese trade balances with Europe, the United States and the rest of the world. They also show how rapidly exports and imports are growing with each area.
Back in 2001, when Western economies were weak, Chinese imports from America and Europe were growing more rapidly than Chinese exports. The opposite is true now.
For the past 12 months, the Chinese surplus with the United States was $154 billion, as Chinese exports rose almost 22 percent while its imports rose less than 20 percent.
The European surplus was smaller, at $117 billion, but exports to Europe were rising at a rate of more than 32 percent, far above the 18 percent growth rate in imports from Europe.
The Chinese surplus with the United States is now 62 percent higher than it was just two years ago, but the surplus with Europe is up 136 percent. One reason for that is that while the dollar lost more than 7 percent of its value against the Chinese currency over the last two years, the euro actually gained against the Chinese currency.
As China allowed its currency to appreciate gradually against the dollar, traders sent the euro up against the dollar at a faster rate.
China 's trade deficit with the rest of the world, which now stands at $54 billion, has been shrinking after hitting a peak of $86 billion early last year.
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