Tuesday, February 01, 2005

China as an Economic Engine

The Chinese economy is growing very fast, some say overheating, in large part because credit is growing very quickly. Credit is growing very quickly in turn because the central bank is accumulating reserves at an awesome pace. The central bank is accumulating reserves in order to keep the currency from appreciating. The US runs a big trade deficit with China because China's currency is kept cheap through central bank intervention.

But there is more to this story. The Chinese economy is growing very fast, so there is plenty of demand for imports, and a lot of them are coming from the US.

This article from the Seattle Times tells the story of US exports to China.
U.S. shipments to China probably rose to 4.2 percent of all exports last year, up from 2.2 percent in 2000, says Primosch. Increased sales to China contributed to a shift in momentum between 2003 and 2004, with overall U.S. exports showing faster acceleration than the larger import figures. According to Commerce Department figures, total exports rose 12.4 percent on average for last year's first 11 months, almost three times as fast as in 2003.


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