By: Dr. Mike Campbell
Figures just released for the month of August indicate that the US trade balance between exported and imported goods has widened. A substantial slice of the imbalance is due to increased imports from China – a fact which is likely to add fuel to the argument that China’s currency, the Yuan, is artificially cheap.
In August, America imported a record $35.3 billion worth of goods from China, but the Chinese market only absorbed $7.3 billion worth of US products. This led to a record trade gap with China of $28 billion; the worst Sino-American trade gap since October 2008.
The USA and the European Union have both expressed concern that the Chinese Yuan is significantly undervalued. This means that Chinese goods have an unfair advantage in European and American markets because the goods are cheaper than they would be if the Yuan was allowed to appreciate to its market value.
The Chinese authorities have hinted that they will allow the Yuan to appreciate, but the speed and extent of the revaluation are unlikely to satisfy the Americans or the Europeans.
US exports grew by 0.2% in August, but this improvement was dwarfed by the rise in the goods which the US imported which shot up by 2.1% in the same period.