American-Chinese Trade and Exchange Analysis

Japan and China each account for around 9% of U.S. international trade. The Chinese situation is significantly different than the Japanese situation, as American consumers tend to by Chinese goods because of their low cost.

Chinese-American exchange rate and international trade data for 2002 and 2003 is located on the bottom of this article. The column CHN YUAN indicates how many Chinese Yuan can be purchased with 1 U.S. Dollar. An increase in this number represents a strengthened (apperciated) U.S. Dollar, and a decrease in this number represents a weakened (depreciated) one. The column CHN DEF indicates the size of the trade balance the U.S. has with China. All the numbers in that column are negative, indicating that the United States has a trade deficit with China. The numbers are in millions of U.S. Dollars, so -13565.50 across from Oct-03 indicates that U.S. trade deficit with China was 13.6 billion dollars for the month of October 2003. This also happens to be the largest one month trade deficit in U.S. history.

The exchange rates given at the bottom of this article are not a mistake. The Chinese Government has fixed the value of the Yuan such that 1 U.S. Dollar is worth 8.28 Yuan on foreign exchange markets. This is caused concern in Washington, as an artificially overvalyued Yuan keeps Chinese imports into the United States artificially inexpensive. This helps explain the massive increase in the U.S. trade deficit with China, as the size of that deficit has doubled in the last 22 months. The Association for Asian Research has some interesting background material on why the yuan is overvalued and the stresses this is causing to the Chinese Economy. Their article "Chinese Yuan should be devalued: Inflation an indicator of false prosperity" is a must read for anyone interested in the issue.

The refusal of the Chinese government to have a market-determined exchange rate seems to be causing an increase in the U.S. trade deficit. Not surprisingly, the Chinese Government does not see it that way, as reported by the Xinhua News Agency:

China's Minister in charge of the State Development and Reform Commission, Ma Kai, described the imbalance as structural in nature that reflects the changing commerce pattern and a high degree of complementarity between the two countries. China's currency exchange rate was not to blame for the US trade deficit, he said.

He challenged the assumption that revaluation of the Chinese currency will help narrow the US trade deficit with China. Noting that the United States has either stopped or substantially reduced the production of the type of goods now imported from China, he said the United States would have to import these goods from other countries even if it cuts down on its imports from China.

In the final section of this series, we'll look back at the data and try to explain the persistant trade deficit the United States has with the world.

To learn more about American-Chinese Trade you'll want to read these articles:

LINKS

• NBC News - U.S. Trade Deficit With China Hits High
• Business Times - US Trade Deficit Widens to US$42b
• The Oregonian - Trade Deficit Grows, but U.S. Exports Gain, Too

Final Section: Conclusion

LIST OF SECTIONS

• Section 1: The Trade Deficit and Exchange Rates
• Section 2: Canadian-American Trade and the Canadian-American Exchange Rate
• Section 3: Mexican-American Trade and the Mexican-American Exchange Rate
• Section 4: Japanese-American Trade and the Japanese-American Exchange Rate
• Section 5: Chinese-American Trade and the Chinese-American Exchange Rate
• Section 6: Conclusion