Chinese imports fuel US trade gap | business | Hindustan Times
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Chinese imports fuel US trade gap

business Updated: Oct 15, 2010 21:53 IST
Howard Schneider

The monthly US trade deficit surged in August, fuelled by a record gap in trade with China and a weak overall showing for American exports.

Along with data released in Beijing earlier this week, the latest international trade report from the Bureau of Economic Analysis is likely to intensify criticism of China’s economic policies, particularly the country’s close management of its currency.

China’s central bank reported on Wednesday that its holdings of foreign currency had jumped by nearly $200 billion in September.

Analysts said the torrid rate of accumulation was the result of the central bank’s efforts to prevent the local renminbi, or yuan, from rising in value, a policy that helps keep the country’s exports comparatively cheap.

By selling renminbi and buying dollars and other currencies, the People’s Bank of China lowers the price of its currency.

The bank’s ability to keep up those purchases is closely tied to the country’s large trade surplus with the rest of the world, most notably with the US.

The monthly imbalance between the two countries widened in August to a record $28 billion, compared with just less than $26 billion the month before. US imports of Chinese goods jumped to $35 billion from $33 billion in July, while US exports to China fell to $7.2 billion from $7.3 billion. The overall US trade deficit was $46 billion, up from $42 billion the month before.

The data, released on Thursday, on the state of the US economy highlighted two of the main concerns: continued high unemployment, and a sense that trade shortfalls with China and other countries are undercutting US factories and workers.