Saturday, August 11, 2007

China trade surplus up despite growing tension

Candidates at the recent U.S. Democratic presidential debates weren't very friendly when asked about relations with China. They called it a "competitor" or even an "adversary," and it was obvious that a tough stance against China will be part of the Democratic platform.

Yet, despite the tensions between the two countries and the repeated reports of tainted or faulty Chinese goods making their way into the U.S. market, the Chinese trade surplus still rose a sharp 67 percent in July from the same time last year. The July figure was also China's second highest surplus ever topped only by figures in the previous month of June.

Washington has complained about Chinese currency manipulation and the stakes may have been raised when an official Chinese think tank suggested Beijing might sell off its U.S. dollar reserves in retaliation. China owns about $900 billion in American bonds about three-thirds of its foreign capital reserves.

Demand for Chinese goods has not slowed much despite the recent unfavorable reports, but China's attempts to curb an overheated construction boom appears to have cut purchases of U.S. goods.

The dollar weakened against the euro and other world currencies Wednesday after a British newspaper report claimed Beijing may sell off its US assets if Washington imposes threatened trade sanctions on China.(AFP/File/Philippe Desmazes via Yahoo News)

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