China’s economy continues to slow, according to recently released August trade figures. They showed imports to the country fell 13.8 % on last year in dollar terms, while exports were down 5.5 %. These results caused China’s trade surplus to increase 40 % on the previous month to $60.2 billion. Despite the fact they were prepared for trade to be down, analysts said the drop in imports was larger than expected. According to an analyst who spoke to the BBC, “Chinese investors are now poised to expect a slew of weak economic data ranging from foreign trade to PMI [purchasing manager’s index] to industrial output.”
These latest results are bad news for the U.S., which currently has a trade deficit with China. Figures showed the U.S. trade deficit with the rest of the world fell 7.4% in July, to $41.9 billion. Exports were up 0.4% at $188 billion, helped by higher car sales. As of August, the U.S. trade deficit with China was $43.8 billion. Although economists remain divided on the impact of this deficit, some say it has the potential to trim as much as 0.5% from GDP growth. The U.S. deficit with China is set to be its highest ever this year, and is the largest trade deficit with any country.
This deficit is politically sensitive, and relations with China have been tense with the White House criticising China’s decision to devalue its currency. Economists expect the Chinese economy to continue to contract, although the impact on world markets is expected to be less when compared to the initial shock last month. Measures proposed to shrink the U.S. trade deficit with China include increasing U.S. exports and encouraging small and medium sized businesses to export their offerings.
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