The China Trade Trend Picks Up Steam
Tuesday, July 10, 2007PAUL KANGAS: China surprised economists today with news its exports to the world rose almost 22 percent, sending that country's trade surplus to $26.9 billion in June. At this pace, the U.S. trade deficit with China is sure to expand beyond last year's $232 billion record.
Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: If China were a growth stock, it would be outperforming expectations. But surging Chinese exports threaten to spark inflation at home and worsen political tensions with the United States. China analyst Jeffrey Bader says this is one record Beijing can do without.
JEFFREY BADER, DIRECTOR CHINA PROJECT, THE BROOKINGS INSTITUTION: It's discouraging. The steps that the Chinese have taken so far clearly are not slowing the pace of exports.
GERSH: China's global trade surplus in June hit $26.9 billion, up 85 percent from a year ago. For the first half of the year, China's trade surplus topped $112 billion. It is possible some of the strength was exaggerated, as companies tried to beat a July 1st rule change eliminating tax rebates for many exports.
John Frisbie is president of the U.S.-China Business Council.
JOHN FRISBIE, PRESIDENT, U.S.-CHINA BUSINESS COUNCIL: That rule change had driven a lot of those exporters to record sales in June, prior to the July 1st date, which perhaps contributed to the large global increase. We'll see if that's the case as we get into the second half of the year.
GERSH: So far, safety concerns over dangerous chemicals found in Chinese toothpaste and other products haven't cut into export demand. Beijing today sent a signal of its determination to protect the reputation of Chinese products by executing the former head of its food and drug agency. Zheng Xiaoyu was convicted of accepting bribes to approve a drug later blamed for killing 10 people.
But China scholar Minxin Pei says pledges of regulatory reform in China are as short- lived as many campaign promises in the United States.
MINXIN PEI, CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE: The savvy people will take away from this example this: Do not mess with the government at this point, because the government is serious about this problem right now. Three months from now, we don't know.
GERSH: Reform will require sweeping changes. A recent Chinese government survey found one out of every five products sold in China is laced with toxic chemicals or additives or lacks proper labels. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
