Chinese economy is booming again as it posted the biggest ever monthly trade surplus in the month of July. The Chinese government initiated a slew of measures to prevent the economy from slowing down and this has generated a big rebound in the country’s exports.
A Reuter’s survey had predicted a surge in exports around 7 to 8% but the Chinese economy did much better than that and exports surged to almost 15%. The surge is seen in all its major trading partners which includes –the US, E.U, Japan, and South East Asia.
The forecasts have been proved wrong with respect to the imports also. While experts were forecasting a 3% increase, it actually fell by 1.6%. This could be caused by the lower prices for commodities which fuel the Chinese economy. Iron ore imports have increased by 18% fueled by the demands in the steel industry but the average price has fallen by 15%. Something similar has happened with coal imports which fell by 2.2% by volume and the price also fell by 15% as compared to the prices last year.
The trade surplus has hit $47.3 billion in July, up from $31.6 billion in the previous month. Again the experts got it wrong and had predicted a shrinking of $28 billion.
The efforts of the Chinese government to reverse and stop a slowdown by introducing measures like downgrading exports and focusing on domestic consumption seems to be working, at least temporarily. The declared goal of rebalancing the economy has succeeded but there are fears that it will lower the value of yuan against the dollar and give it a competitive edge in the international market. The economic data has however shown a marked improvement in the last two months and the Yuan has risen by 2% against the Dollar.
The other country with a big trade surplus is Germany which has reported a modest 1.1% surge in exports in June and leaves them with a 2.1% on the year and up 2.4% for the first of the year as a whole. The trade surplus was a whisker higher than last year, from €92.4 billion to €93.5 billion. Both China and Germany with its trade surplus are a big source of heartburn for US which sees it as major imbalances in the world economy. Germany being an open economy has no direct control over its exchange rate and lets the market do the talking. However in the past it has benefitted from sharing a currency, the Euro, with other European countries whose current accounts are much weaker and this reduces the upward pressure on it.
Germany faces a lot of flak for not doing enough to help other Eurozone economies by buying goods from these regions. Exports to Eurozone countries stood at €208.6 billion while imports were €2o7.3 billion.