Imports from China, Numbers Please

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Sunday, 03 October 2010 20:59

The NYT discussed the issues involved in currency pricing and trade protection with reference to China and other countries. The article raised concerns that growing protectionism could hurt economic growth, but it never noted that most highly educated professionals already benefit from extensive protectionism. The inequality resulting from their protection is one of the key factors motivating protectionist sentiments in the United States.

It also raises the prospect that a higher valued yuan would seriously damage China's economy. It would have been helpful to note the importance of China's exports to the U.S. to its economy. China's good exports to the U.S. are approximately equal to 6 percent of its GDP. Even a sharp rise in the yuan is unlikely to reduce its exports by more than one-third (2 percent of GDP) over a 2-year period. This is currently equal to less than 3 months of growth in China.

It is also worth noting that China's exports to the United States fell by 17.4 percent from the third quarter of 2008 to the third quarter of 2009. China was able to offset the loss of export demand from the United States and elsewhere with a massive stimulus package. As a result, its economy grew by more than 9.0 percent in 2009.