China produced disappointing trade data today giving reason to believe that the world’s second largest economy is beginning to feel the brunt of Europe’s debt woes coupled with the United State’s sluggish growth.
Global financial weakness is now being reflected in China’s decline in both exports and imports led to the narrowing of the country’s trade surplus.
China’s trade surplus of $14.5 billion in September was smaller than August’s $17.8 billion and less than half of the $31.5 billion recorded in July. Exports to the crisis-ridden European Union dropped to the lowest since June.
Both imports and exports were weaker than forecast. Exports rose 17.1 percent last month from a year ago, slowing from a 24.5 percent gain in August, and imports rose 20.9 percent, compared with August’s 30.2 percent increase.
With exports growing at a slower-than-expected pace, this may push Beijing policy makers to move away from allowing the yuan to appreciate further in the coming months for fear of negatively affecting its exports.
The trade data on Thursday prompted the deputy chief of the country’s customs administration to complain that a stronger yuan was hurting exports. Slower import growth could also raise pressure for fiscal loosening, despite inflationary pressures.
Meanwhile, the U.S. Senate approved a controversial bill on Tuesday aimed at forcing China to push the Chinese currency higher against the dollar, which supporters argue would reduce a U.S. trade deficit with China of more than $250 billion.
The vote on Tuesday “has put the Chinese on notice: ‘Stop your cheating that is costing our country jobs, or you will face the consequences,'” said Democratic Senator Charles Schumer, one of the bill’s co-sponsors. China was quick to respond. The Foreign Ministry said the bill was a protectionist step and warned that its passage could disrupt joint efforts by the world’s two biggest economies to prop up the global recovery. It urged the Obama administration to oppose the legislation.
