China’s First Trade Deficit In Six Years
China posted its first trade deficit ($7.24 billion ) in March its first monthly trade deficit in nearly six years, even as the yuan stayed pegged to the dollar, aiding government efforts to play down the currency’s role in global economic imbalances.
Main cause was said to be the excess imports along with a surging domestic economy while exports grew more modestly. But after accumulating $2.4 trillion in foreign exchange reserves, trade deficits have become less of a monetary policy issue. Commerce ministry officials have warned, however, that if trade deficits reflect weak overseas demand and exports stumble, then layoffs at export factories could eventually increase unemployment and hurt social stability.
While Harry Reid (Senate Leader) warns China on its currency policy – “If China does not satisfactorily address the concerns raised by its currency policy, this legislation could come to the floor in some form during the upcoming work period,” Reid’s spokeswoman said.
“I hope you would consider a significant revaluation to bring the value of the RMB in line with economic fundamentals, and after that, to return to a more robust version of the ‘managed float’ that your government previously maintained,”