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Facing a Slowing Economy, China Turns to American Exports

Mujraparty

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WASHINGTON — A weakening Chinese economy, underlined by a further slowdown disclosed on Friday in Beijing, is starting to pose a headache for United States officials and the two presidential campaigns, as Chinese companies shift toward a greater reliance on selling to the American market.

A real estate bust in China and sweeping layoffs in the country’s construction sector, together with slower growth in retail sales and declining exports to Europe, have left one area that is thriving: exports to the United States.

But the result is a swelling American trade deficit with China in an election year. The bilateral deficit widened 10.2 percent in the first five months of this year compared with the gap in the period a year earlier, and preliminary data suggest that it widened further in June.

The deficit could swell even more as November approaches. The weakness of the Chinese economy is holding down its demand for American exports, even as Chinese exporters show a laserlike focus on selling to the American market.

The Obama administration has stayed silent about the Chinese export surge to the United States because it does not appear to stem from an explicit policy drafted in Beijing. The American market has become more appealing for many companies in China because of slowing demand in their home market and from Europe, as opposed to government subsidies or other policies.

But a call by China’s premier, Wen Jiabao, on Tuesday for increased investment spending has stirred some concern in Washington. American officials had been pressing China to expand consumption instead of building ever more factories that could someday produce even more exports.

“I think it’s worrisome because if China is going to do its tried and tested way of responding to an economic slowdown by increasing investment, it just sets the stage in the future for increased trade frictions,” said an American trade official who spoke on the condition of anonymity because of diplomatic sensitivities.

Exporters like the Shenzhen Ezoneda Technology Company, a manufacturer of electrical extension cords and computer cables in southeastern China, are finding an attractive market in the United States and are becoming better able to supply it. After struggling as recently as late winter to recruit enough workers, exporters are now able to run assembly lines flat out as companies supplying the domestic Chinese market lay off workers or slow their hiring.

“It is easier to find workers now than in February, it is easier to find workers this year compared to last year,” said Nick Tan, the sales manager at Shenzhen Ezoneda.

At the same time, slumping demand for steel and other commodities by construction companies and other businesses supplying the Chinese domestic economy has made it cheaper for exporters like Shenzhen Ezoneda to buy materials.

China announced on Friday that its economy grew at an annual rate of 7.6 percent in the second quarter, down from 9.5 percent in the period a year earlier. It was the sixth consecutive quarter of falling growth and the weakest officially acknowledged growth rate since the first quarter of 2009, at the bottom of the global financial crisis.

But the Chinese government also said on Friday that nationwide electricity production actually dropped 0.9 percent in June from a year earlier. That could be a sign of a much deeper slowdown. Lombard Street Research in London estimated China’s annualized growth rate during the second quarter at a little less than 4 percent.

The Obama administration portrays its China policies as a success over the last three and a half years, pointing to a 7.2 percent appreciation in the renminbi against the dollar since President Obama took office. This has made Chinese exports costlier in the United States and American goods more affordable in China.

Add in faster inflation in China than in the United States over most of this period and the renminbi’s real appreciation was 10.2 percent through May.

But the renminbi has slipped 1 percent against the dollar from its peak on May 2. The difference in inflation rates has also reversed in recent months, with producer prices in China down 2.1 percent in June from a year ago, even as they rose 0.1 percent in the United States.

The administration has stayed silent during the renminbi’s modest retreat, not least because there is little evidence that the Chinese government has played much role in it. The renminbi has fallen less against the dollar than most emerging-market currencies in recent weeks.

Chinese companies have been slower in recent months to convert the dollar receipts from their exports back into renminbi, reducing demand for the Chinese currency. The renminbi has seemed less likely to appreciate and many companies are seeking ways to diversify their operations and investments overseas.

China’s central bank has actually been restraining what would otherwise be a faster fall in the renminbi. It has done so by frequently pegging the start of each day’s trading at a stronger level against the dollar than the close of the previous day’s trading.

Chinese economic weakness, coupled with rising exports, poses challenges for presidential campaigns. Mitt Romney, the presumptive Republican presidential nominee, has portrayed China as an economic powerhouse that bends trade rules and has called for labeling China as a currency manipulator and challenging it on trade policies from his first day in office.

Asked about the latest signs of economic weakness in China, Andrea Saul, a spokeswoman for the Romney campaign, responded in a statement on Friday that, “Regardless of China’s economic performance, Governor Romney will insist from Day 1 that they put an end to their intellectual property theft, market restrictions and currency manipulation.”

The Obama administration faces constant pressure from labor unions to take a more confrontational stance toward China on trade. But the unions, generally supportive of his re-election bid, have stayed largely quiet in recent weeks.

http://www.nytimes.com/2012/07/14/b...o-us-surge-as-the-domestic-economy-cools.html
 
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These are normal business cycles that make the economy stronger, not weaker. In hard economic times companies are forced to make their operations more efficient and the inefficient compnies are weeded out. Also, slower economies forces companies to find new markets.
 
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Seems in many countres' minds, for China, 7 percent growth is too slow, China will collapse if under 7.
The world has been accustomed to china high growth, they also shoud be accustomed to relatively low growth of china, china will slow down its step to adjust our economic structure.
During these time, maybe we will shift some low value industry to india to help the poor and develop its economy, India should grasp the chance.
 
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Smart moves by companies like Shenzhen Ezoneda Technology Company, be able to change and adapt according to the the cost of productions and the markets where the demands are strong. These quick maneuvers of private and semi private enterprises will ensure China can survive better in the world wide economical stagnation environment than the others.
 
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@sweetgrape there was a time when china grew at 11 to 12 percent GDP and india grew at 8. Now india growing at 5 to 6 and china at 7.... Whos closing gap? All am trying to say is that chinese here makes fun of indian GDP growth. Since when 5 to 6 percent growth is shameful? Spread love and peace.... Stop making fun of people. What goes around comes around.... Believe in Karma.... Thanks....
 
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The world is depending on China to lead it out of This recession...

& I don't think USA would let China back on its feet if it gets the Chance.

If china can get back on its own ,well and good...but i doubt it, as its GDP growth rate is heavily dependent on the fiances form exports as much as 50+%.
So we can expect growths no lower than 5-6 % optimistically.


In this scenario ,Only India has the next biggest human resource ,and with a devalued currency can boost exports

if the policies are conducive India can still get arnd 7.8% growth this year. This means a better revenue opportunity for the Investors.

Though i don't see many visible changes until late this year ,this is when when all the policy action might kick in on sentiments.

Re: Facing a Slowing Economy, China Turns to American Exports
Seems in many countres' minds, for China, 7 percent growth is too slow, China will collapse if under 7.
The world has been accustomed to china high growth, they also shoud be accustomed to relatively low growth of china, china will slow down its step to adjust our economic structure.
During these time, maybe we will shift some low value industry to india to help the poor and develop its economy, India should grasp the chance.

I hardly doubt CHina will outsource, as it still has a large population to employ. and looking at china stingy nature it will refrain from making big investments in this climate. Though if it get desperate enough who knows,.
 
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@sweetgrape there was a time when china grew at 11 to 12 percent GDP and india grew at 8. Now india growing at 5 to 6 and china at 7.... Whos closing gap? All am trying to say is that chinese here makes fun of indian GDP growth. Since when 5 to 6 percent growth is shameful? Spread love and peace.... Stop making fun of people. What goes around comes around.... Believe in Karma.... Thanks....


LOL Didn't you make fun of Chinese products the other day and as a result both of our posts were deleted.
 
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These are normal business cycles that make the economy stronger, not weaker. In hard economic times companies are forced to make their opoerations more efficient and the inefficient compnies are weeded out. Also, slower economies forces companies to find new markets.

I like it..you are very loyal to your master....

If this news about India's slow down economy...you would have declared that India's economy is doomed..
 
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Seems in many countres' minds, for China, 7 percent growth is too slow, China will collapse if under 7.
The world has been accustomed to china high growth, they also shoud be accustomed to relatively low growth of china, china will slow down its step to adjust our economic structure.
During these time, maybe we will shift some low value industry to india to help the poor and develop its economy, India should grasp the chance.

LOL Didn't you make fun of Chinese products the other day and as a result both of our posts were deleted.

dunno where CD is but china should now focus on reducing taxation on the populace to start of with significant reduction in income taxes on its citizenry......

when the economy is bad people rush to save money when you reduce direct income taxes during recession times in economy people will save a little & spend a little which should result in additional spending help boost the internal consumption & offset drops & sustain the economic cycle. Economies are mainly built on trust & phychological factors. Hope CD reads this

service & other forms of taxes can stay as they are for now.
 
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Few weeks back these chinese were jumping like frogs on Indian economy slow down and declared that Indian economy is doomed....now they got to eat their own pills :D
 
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Seems in many countres' minds, for China, 7 percent growth is too slow, China will collapse if under 7.
The world has been accustomed to china high growth, they also shoud be accustomed to relatively low growth of china, china will slow down its step to adjust our economic structure.
During these time, maybe we will shift some low value industry to india to help the poor and develop its economy, India should grasp the chance.

what else can be expected from a product of a low value country.....wanna go out of your way and talk? I am there....!!!
 
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Few weeks back these chinese were jumping like frogs on Indian economy slow down and declared that Indian economy is doomed....now they got to eat their own pills :D

You know the difference is that china is slowing because the global economy is slowing.

India is not slowing, it's a full on economic and financial crisis with the currency collapsing, budget deficit problems causing India's fiscal situation to be in dire straits.

We don't have budget crisis or currency crisis.

The fundamental situation of the Chinese economy is the best in the world, whereas India's fundamentals are in horrible shape.

We are also doing many reforms during the slowdown such as allowing private capital in SOE, liberalizing interest rates, exchange rate flexibility, capital market reforms, etc.

India is spooking investors.

Obviously i don't expect any Indian to understand these things, so carry on.
 
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