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Exports to US slow down due to subprime crisis, appreciating yuan

By Nie Peng (chinadaily.com.cn)
Updated: 2008-09-23 18:24

The growth of China's exports to the United States slowed in the first seven months of this year with the worsening US subprime crisis and continual appreciation of the yuan against the US dollar, China Customs said in a report released on Monday.

The latest statistics released by the General Administration of Customs showed the bilateral trade volume grew 13.2 percent to reach $189.11 billion from January to July, falling 4.3 percentage points year-on-year.

Exports to the US climbed 9.9 percent to $140.39 billion in the first seven months, down 8.1 percentage points year-on-year. It was also the first time since 2002 that the growth rate of US-bound exports had dropped below 10 percent.

Meanwhile, China imported $9.1 billion worth of agricultural produce from the US, a jump of 75.3 percent year-on-year.

The acceleration of agricultural imports helped boost China's imports from the US to $48.72 billion, up 23.8 percent. The growth rate rose 7.9 percentage points year-on-year.

According to the report, the US subprime crisis has deepened since its outbreak at the end of last year, posing severe challenges for the US economy. The sluggish economy has in turn led to weak demand in imports.

China Customs estimated that China's export growth rate would fall by 4.75 percentage points with every one-percentage-point drop in the GDP growth of the US.

The US government has resorted to powerful fiscal and monetary policies such as tax and interest rate cuts to reduce the risk of an economic slowdown.

Although stimulating measures were likely to save the US economy from the brink of recession, it would remain stagnant for a long time to come, a source with China Customs told Shanghai Securities News.

The source also warned of a possible rise in trade protectionism in the US. Statistics showed the US had launched 18 investigations targeting its trade partners so far this year, with 15 aimed at China.

Moreover, the US has been taking measures to expand exports as part of its efforts to boost the economy. In June, its export growth rate hit a record four-year high.

At the same time, the renminbi has continued its appreciation trend. By July 31, it had appreciated more than 18 percent against the greenback since its peg to the US dollar was removed in July 2005.

The yuan's appreciation has given a competitive edge to US exporters while reducing the price competitiveness of Chinese products on the US market.

China is likely to face more uncertainties as the outlook of the global economy becomes more complicated. The country is keeping a close eye on the US subprime crisis in order to get prepared for any emergencies.