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Monday, September 11, 2006

China's Trade Gap Widens

Meantime China's trade gap continues to widen:

China's trade surplus rose to a record for the fourth straight month in August, adding pressure on Premier Wen Jiabao to let the yuan gain faster.

The gap widened to $18.8 billion last month from $14.6 billion in July, the government-run Xinhua news agency reported, citing the Beijing-based customs bureau. The figure brings the trade surplus so far this year to $95.7 billion, compared with a gap of $102 billion for the whole of last year.

China's ballooning trade surplus is flooding the economy with cash, hampering government efforts to rein in lending and investment. With the gap set to top last year's record $102 billion this year, Wen may be pressed to let the yuan rise faster to slow money inflows and avoid U.S. trade sanctions.

``China appears to be running out of effective tools'' to slow growth, said Charlene Barshefsky, a former U.S. Trade Representative and now a senior international partner at law firm WilmerHale in Washington. A more flexible exchange rate would be ``an effective and efficient means of cooling the economy and placing China's growth on a robust and sustainable course.''

Well, China may be running out of effective tools to cool off, but if the demand for its export products worldwide takes a serious knock, then that should cool things off a bit, unfortunately. Inflation, what inflation??

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