EU trade gap with Asia stirs currency debate

European trade deficit with China and Japan soared in the first seven months of the year, statistics showed Wednesday, providing fresh support for a push by Continent’s governments for stronger Asian currencies.

The dozen euro countries imported a record €47.6 billion more than they exported to China, up 24 percent from a year earlier. The trade deficit with Japan increased 19 percent to €12.8 billion in the January-July period.

The growing imbalance with the two largest Asian economies may re-ignite calls for China and Japan to let their currencies appreciate as Europe’s finance chiefs seek to protect exports and the strongest economic growth in six years.

Officials in Europe last month took aim at Japan, complaining that the yen’ drop against the euro this year threatened their exports.

The increased pressure on Japan follows three years of international criticism of China for its refusal to inject much flexibility into its currency, the yuan.

China’s growing trade strength and doubts about its willingness to respect international rules have fed protectionist sentiments in Europe. The EU this month imposed duties on €9.7 billion of Chinese and Vietnamese footwear.

The International Herald Tribune, October 19-th, 2006

№ 6.

DIGITAL DRAGON

China for the first time has surpassed America to export the most technology goods around the world according to new figures from the Organization for Economic Cooperation and Development. The crossover took place last year, when China exported $180 billion of computers, mobile phones and other digital stuff, exceeding America’s international sales of $149 billion. A year earlier, in 2003, China’s technology exports had overtaken those of both European Union and Japan.

Given China’s importance as a center of low-cost manufacturing, its rise as an industrial power in technology goods is hardly surprising. From $36 billion in 1996, its world trade in tech goods – both imports and exports – has grown as much as 32% a year, to reach $ 329 billion in 2004.

China’s rising share of the market has been matched by fall in the dominance of America. Almost all big IT firms have included China into their supply chain.

China is the biggest IT exporter to America, having overtaken Japan in 2004. It accounts for 27% of all American IT imports, which last year generated a trade surplus of $34 billion. For the moment, China’s edge is in the low-end work: it imports components, assembles them and exports finished goods.

The Economist, December 17, 2005

№ 7

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