Imports from China in the first four months of this year, at ?45.3bn ($54.5bn, ?31.5bn), were 19 per cent higher than the same period a year before. Imports from the US remained almost flat at ?52.6bn. In contrast, EU exports to China fell by 1 per cent to ?15.2bn, while exports to the US rose by 2 per cent…..
China?s economic expansion suggests the rate of growth of exports to the EU is likely to be maintained. By the end of this year, imports from China could be almost three times higher than the level in 1999. That increases the pressure on domestic producers, as well as eurozone exporters.
EU25 trade was characterised by an increase in the EU25 surplus with the USA (+24.2 bn euro in January-April 2005 compared with +23.0 bn in Januar y-April 2004 ) and Switzerland (+ 6.0 bn compared with +3.8 bn). The EU25 trade deficit grew with China (-30.1 bn compared with -22.8 bn), Russia (-16.3 bn compared with -11.5 bn) and Norway (-10.0 bn compared with -8.0 bn), and fell with Japan (-9.9 bn compared with -11.5 bn).
Concerning the total trade of Member States, the largest surplus was observed in Germany (+ 55.0 bn euro in January-April 2005 ), followed by the Netherlands (+ 11.8 bn), Ireland (+ 10.8 bn) and Sweden (+ 5.8 bn) . The
United Kingdom (-30.7 bn) registered the largest deficit, followed by Spain (-22.6 bn) , Greece (-10.4 bn) and France (-9.9 bn).
I’m not very happy with the ‘US Trade Figures‘ post I put up last Friday. I think it’s a glorious mess. The key to the problem is that I tried to deal with two – interrelated but disinct – topics at once: the euro and China trade. So today lets ignore the euro (which has once more resumed the downwards drift, even as I write) and take a bit of a closer look at where we are – in trade terms – with China. (Btw: the planet has finally returned to its orbit, and Brad Setser has an analysis of the US trade data here).
The big item in this weekend’s news is, of course, the agreement reached with Beijing on textiles. The EU textile industry will now have three years to adapt, but since textile manufacturers don’t appear to have taken too much advantage of the ten previous years, it is hard to know whether this will serve any useful purpose. Doubly so, since it is not yet clear how the calculations will be made, and I have the distinct impression that much of the recent surge in imports will now, in effect, be consolidated.
So are the China trade surplus ones. Dave at MacroBlog has the details on China. I’m waiting for Brad Setser to post, but he must be either doing his sums, or having a late breakfast :). Before we get some blog analysis (even Brad Delong is quiet today) you can get the basics here. In fact the rise in the April CA deficit to $57bn, from $53.6bn in March, is supposed to be good news, since the increase wasn’t as big as expected.
Essentially I am outside the Atlantic blog consensus here, since I think the US dollar will hold, and that it is the euro which is in trouble. I have a little post on this here. Logically if the other major alternative as a reserve currency is in trouble under Bretton Woods Mark I, everyone goes home to Daddy. I think that is how it will be.
Update: Well Brad still isn’t there but Stephen Roach is. I think his view is the dominant one on the US blogging scene, and shared by non-blogging economists like Paul Krugman. I’m sorry, I think it’s wrong, and by a long way.
Update 2 I’m getting a little tired of waiting (incidentally General Glut has just passed by in comments, and he *does* have a post on the topic). Now the politically sensitive US trade gap with China widened $14.0 percent in April to $14.7 billion. This means it was $12 billion in March, or that it rose $2.7 billion. Now China’s surplus widened to $8.99 billion from $4.59 billion. Doing the arithmetic the surplus rose $4.4 billion. $4.4 billion minus $2.7 billion gives $1.7 billion, a hell of a big chunk of which was probably with Europe. I wish someone who really knew about this would write something, but my educated guess is that Chinese import penetration in Europe is now big and getting bigger by the month. Hence the row about globalisation in the French referendum. Basically what I am saying is that having this kind of issue in the Free Trade US of A is one thing, having it in the more anti-globalisation European core is going to be quite another. China the global imbalance to end all (im)balances.
“Beijing on Sunday criticised the European Union’s plans to restrict imports of textile products amid heightened controversy surrounding the threat Chinese clothing exports pose to the world’s manufacturers.”
“A spokesman for the Ministry of Commerce, Chong Quan, said that the EU’s efforts to limit importsof some clothing products from China were rash and unfair…..It is an inaccurate assessment and an incorrect decision,? said Mr Chong of the EU’s latest move. ?It not only sends the wrong signal of trade protectionism to the European industry, but also seriously harms the rights that Chinese enterprises are allowed to enjoy in the global textile trade.?
Really I would say that the timing of this response from China is very much to the point. The EU has now to ‘interpret’ yesterday’s vote and answer. Do Europeans want more protectionism, or should we press ahead with a new and improved Doha round (including the reform of agricultural subsidies, which of course, will not be popular in France). After giving the Bush administration the runaround on currency reform over the last six months, it appears Beijing may now be about to give the EU a little more attention. The really interesting detail will be to see the response. I think this is what might give financial markets a first hint of where we are going.
The Chinese minister of trade Bo Xilai was in Paris yesterday. Most likely this is simply a happy coincidence, but the timing couldn’t have been better. The issue of Chinese textile imports has become one of the issues in the French referendum, and minister Bo was conveniently available to make all the right gestures:
“We want to soften the shockwave that there could be from the rise in Chinese textile exports,” Bo told a news conference after talks with French trade minister Francois Loos…”It is a temporary phenomenon and this phenomenon will weaken or disappear”.
Currency traders around the globe lazily staring into their screens must have found themselves transfixed last Friday when the flatline indicating the value of the Chinese yuan (or renminbi if you prefer) suddenly jumped to life. And so it was that during a brief 20 minute interval the yuan surged to a level of 8.270 to the dollar from the hypnotic and seemingly eternal value of 8.276. Now 6 thousandths of a dollar isn’t really a very big deal, but it is the sheer fact that it happened that is causing all the fuss. Continue reading →
I have to confess to having had a fairly sucky 2004. Most of the causes are personal, and frankly not very interesting. But, as an example, my plan to spend the holiday season in Tunisia was abruptly cancelled because my wife got chicken pox. So, needless to say, I’ve been looking forward to 2005.
The wife got over her pox just a few days before Christmas, leaving us scrambling to find a vacation that both fit our respective work calendars, didn’t cost too much, and wasn’t booked solid. Consequently, I found myself at Zaventem airport at four in the morning on Christmas day fighting a miserable crowd so I could spend a week at Benidorm, Valencia, Spain.
I can’t claim I wasn’t warned. I did know that Benidorm – and the rest of the Costa Blanca – is something of a joke in the Dutch speaking part of Europe. After a week there, I still haven’t been in Spain. As far as I can tell, thanks to daily discount charter service between Sheffield and Alicante, the Costa Blanca is simply a warm, low-tax part of Yorkshire. Continue reading →
Well I suppose it’s better to end the week on a bang rather than a whimper, so here I go with another of those posts. What really ended the week on a high note (or should I say a low one) was the US labour market. And since I am arguing that the euro-dollar parity is being driven at the moment by US labour market data, this news can only mean one thing: more upward pressure on the euro. Which makes me only want to re-iterate, and even more strongly, that an important opportunity was wasted yesterday to take some remedial action by lowering the interest rate. Remedial action which would also have supplied a much needed lifeline to Germany’s beleagured economy. But this, like so many things, was not to be. Continue reading →
“Madam Wang Haiyan, who runs a pre-school class from her home, reckons that she would have been earning half of what she is now and be less happy to boot if she had stayed in her job at a state-owned firm. “
Any one else round here old enough to remember Dustin Hoffman’s ‘Little Big Man’, with the character who insisted on riding his horse back to front? I feel a bit like that sometimes: with my back-office for India and China right here in Barcelona. Of course this makes life pretty surreal, people waltz in on the messenger at all times of the day and night: from all the strange corners of the planet.
This morning it was the turn of one of my ‘sources’ in China: he came in over the messenger to tell me he’d left his job. He has had a ‘new’ idea. He is going to set up a company to do guess what? Outsourcing. He is dead set on it since he tells me he can get university graduates in China to work for him for ‘just’ 150 dollars a month.
Actually in his case no one is going to accuse him of destroying western jobs: he wants to design and put up websites for Western clients who want to sell to Chinese customers. We might well ask ourselves however, if he is succesful in this how long it will be before he leverages his position to start offering those websites in more distant climes. And good luck to him. Continue reading →
This is really a case of two stories in search of a common theme: a theme, that is, which goes beyond the rather random unifying factor of the work of Shanghai based ‘foreign correspondent’ Fons Tuinstra. In fact both points emerged from browsing his blog.
In the first place we have the problem with the uses and abuses of statistics – an issue which surfaced once more this week with the outrageous use of the carefully crafted 7% Japanese GDP growth number (those looking for a rather more jaundiced – not to say realistic – view on this, could do worse than consult Bloomberg’s ever intelligent William Pesek).
But Fons target this week is not the investor-seeking financial press, but rather his own compatriots, the Dutch politicians, and how they have turned the creative use of statistics into an art form, for, as he says:”Dealing with figures is an art: the Dutch call themselves the Chinese of Europe, for a good reason.” Continue reading →