China Trade Deficit Will Kill Currency Discussion

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Photo Credit: Reuters

For the first time in more than six years, Beijing is expected to show that China bucked its trade surplus and imported more than it exported in March 2010.  Although a rare trade deficit is not serious, should China's March numbers prove to come up in the red, any discussion over China's currency manipulation will cease immediately.

A Win for China

Should March's import and export numbers reveal that China is actually paying out more than it is taking in, China will have won an excellent boost in public relations.  Until recently, lawmakers all over the world have called China the biggest currency manipulator in the world, charging the nation with fixing its currency prices in an effort to ensure long lasting trade surpluses.  However, negative numbers could be the shot heard around the world and give China the rationale to continue fixing its currency.

Examining the Trade Deficit

Although the export driven economy has taken a dip since the global recession began, the drop in exports can't shed a light to the amount China is buying from the rest of the world.  Its newest stimulus package of more than $500 billion US dollars has gone mostly overseas to buy up natural resources like steel, oil and concrete.  The stimulus has also been used to build new skyscrapers, patch up existing roads and other infrastructure, and begin one of the biggest rail overhauls in the world.  It isn't the export economy that's suffering; China is investing heavily in itself and spending billions overseas to secure the resources it needs.

China Won the War

Between disagreements over currency manipulation to the monetary policy of the United States, bureaucrats from both nations have swapped a war of words over the economic policies of the opposing nation.  The United States, concerned with its own trade imbalance, blames China for an artificially cheap currency.  China, worried over its holdings of more than one trillion dollars in US debt, has condemned the Federal Reserve and Congress for spending and printing too much money.

It now looks like China may have won the message war, and with its March books expected to reach the red, any discussion over China's currency manipulation has been effectively killed.

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