Monday, December 21, 2009

China To Go Into Trade Deficit in 2010 ?

The E.U. is carrying a trade surplus, and the U.S. trade gap is dwindling. In both cases this is primarily a result of weakness in domestic demand. Likewise, China's trade surplus noticeably decreased last month.

Given their capacity issues, a trade deficit might force China to devalue their currency, even against the debased dollar. This could act as a trigger for the kind of dollar-carry reversal that many people only expect when the Fed raises interests rates in 201(?).

1"Europe's Trade Surplus Spikes" - The Business Insider
2"U.S. Trade deficit shrinks by 7.6%" - San Diego Union Tribune; Calbreath
3"China to stay a plodding "ox" in year of the tiger" - Reuters
4"In Asia, 2010 Likely to Be as Bad as 1998" - Seeking Alpha; Cooper
5"MOFCOM: China's trade surplus may further narrow next year" -People's Daily Online

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