US-China trade gap widens

(Source Article: China's trade gap stretches - FT.com)

China’s monthly surplus amounted to a record US$14.5 billion in June, illustrating the need for a quick revaluation of China’s currency and a broader opening of its market to foreign investment; however, that might be difficult as experts expect a backlash in the country over recent purchasing of local companies by foreigners. The country’s surplus totalled $61.5 billion for the first half of 2006—an increase of some 55 percent over the same period in 2005.

The country experienced a 23% rise in exports from the previous year, with a 19% rise in imports, according to China’s Commerce Ministry. In 2005, China’s surplus reached a record high of $102 billion for the year—triple the $32 billion amount in 2004. Additionally, its surplus with the US alone hit $202 billion. Without the US trade deficit, China would not have had a surplus at all last year. (see China trade surplus hits 14.5 billion - Washington Post)

Visual evidence of the US-China trade gap can be seen in California neighborhoods. Communities lining the Long Beach freeway in Southern California are becoming stacked with cargo containers that once held Chinese imports. With little US exports going out, the containers have no place to go—the mountain of containers grows along with the trade gap. (see Unsightly evidence of US trade gap - LATimes.com)

Last year, China eliminated its peg to the dollar, but that has since had no positive effect on the trade gap. The US government continues to negotiate with China for greater reform and a more flexible currency.