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China's Foreign Reserves Decline While the U.S. Believes China Trade is Unfair

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China's foreign exchange reserves declined in the fourth quarter of 2011, the People's Bank reported (English language report). It was the first drop since the Asian financial crisis of 1997-1998.

Holdings of foreign wealth fell to $3.18 trillion at the end of last year from $3.2 trillion at the end of September -- a .625 percent decrease.

The U.S. monthly trade deficit with China grew in December to $47.8 billion. The annual trade deficit with China for 2010 was $273 billion.

In the U.S., recent public opinion polls indicate that nearly two-thirds (63 percent) of Americans believe China practices unfair trade. China's trade balances with other nations do not necessarily support the view that China practices unfair trade. Of China's top ten trade partners in 2010, only the U.S., Hong Kong, and India had trade deficits. Developed countries, including Japan, Germany, South Korea and Taiwan, enjoyed sizable trade with surpluses.


China Trade Balances With Top Ten Partners 2010 graphic table by scribillare.com
The chart indicates that the countries that sell consumer goods (such as Germany), durable goods (such as Japan), raw materials (such as Brazil) or a mix (such as South Korea), enjoy reasonably positive trade balances on large volumes of trade with China. Note that Hong Kong, sometimes referred to as "the gateway to China," enjoys a large trade in financial services with China as well as other unusual trade activity due to its unique status. The Hong Kong data point may not be indicative of other countries' trade.

The United States, having outsourced its industrial production for virtually all but military goods, by not selling military goods to China (if indeed China would want such goods), has little prospect of lowering its trade deficit with China without a change in course.


China Trade Balances With Top Ten Partners 2010 by scribillare.com

The January 5, 2012 U.S. Strategic Guidance document, which states the U.S. "will continue to make the necessary investments to ensure that we maintain regional access and the ability to operate freely" (in regions of the Pacific important to China), indicates that little policy change should be expected.

This article was co-published at scribillare.com

 

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China's foreign exchange reserves declined in the ... by John Iacovelli on Monday, Jan 16, 2012 at 5:48:39 AM