China's Trade Surplus Soars Again

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China's trade surplus rose 140% in June from the same month last year, to a total of $20.02 billion, attributable primarily to an increase in exports. The numbers were released on July 10 by the China Customs Bureau.

The news immediately set off more debate about the value of the yuan and whether the Chinese government is keeping it low to improve the attractiveness of its exports in global markets. The surplus "points to the need for Chinese authorities to allow continued appreciation of the yuan against the U.S. dollar, given their pledge to allow market forces to determine the exchange rate," Wang Qing, a Hong Kong-based economist at Morgan Stanley, told Bloomberg Businessweek.

The Obama administration has been careful about its reaction to the value of the yuan, probably because federal government sanctions and tariffs on a wide array of Chinese goods could start a trade war. The U.S. needs access to the huge, fast-growing Chinese markets to keep its own exports rising.

On July 9, the Treasury elected again to not label China a "currency manipulator" in the Semi-Annual Report on International Economic and Exchange Rate Policies. A number of members of the House and Senate said that if the Obama administration wouldn't begin to punish China for its trade policies, then Congress would.
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