China’s Exports Fall, Trade Surplus Rises
There’s an article in BBC News this morning that highlights the complexity of China’s role in the global economy. China runs a trade surplus with practically every country with which it trades. As people in the West stop buying consumer good made in China, you’d think that China’s trade imbalance might tend to even out, wouldn’t you? Not necessarily:
December imports fell even more sharply, declining 21.3%, the China Daily reported.
That was a bigger decline than November’s 17.9% drop.
With exports in December worth $111.2 billion, and imports worth $72.2 billion, that made December’s trade surplus $39 billion.
That is the country’s second highest trade surplus ever, just short of November’s record $40.1 billion.
Our correspondent adds that the huge decline in imports is partly due to the slowdown in exports.
More than half of China’s exports are made up of goods which are simply assembled here with components imported from overseas, so as exports drop, the need for those components falls.
Fallling commodity prices play a role, too.
If China attempts to export its way out of its economic downturn, as was Japan’s initial inclination nearly twenty years ago, it would fuel protectionist sympathies in the West from which nobody would benefit other than a handful of Western workers able to wrest subsidies from their home countries. IMO the solution to China’s problem is to cultivate an internal market for its goods, something the Chinese authorities have resisted for years.
Clearly, they need to do something:
The ripple effects of the sharp economic downturn are growing: Crime is rising, as are labor strikes by taxi drivers, teachers, factory workers and even investors unhappy that their stock market holdings are now 70 percent off their peak.
Although Chinese authorities have been able to quickly disband the recent protests, there is concern that a single national-level event, if mishandled by authorities, could lead to a serious political crisis.
“Without doubt, we are entering a peak period for mass incidents. In 2009, Chinese society may face even more conflicts and clashes that will test even more the governing abilities of all levels of the party and government,” Huang Huo, a reporter for the state-run New China News Agency, warned this month in a magazine published by the news service.
Chinese authorities estimate that the urban jobless rate is around 9% while the rural unemployment rate is around 20%. Education is no guarantee of a job: it’s estimated that 1 million new Chinese college graduates will be unable to find jobs this year.
China has little in the way of a safety net for the unemployed so joblessness there falls even harder than it does here.