Whats driving Chinas trade surplus?
The big driver isn’t on the export side but on the import side. Export growth fell a bit, but import growth was barely half what it was in 2004, so there has been this ballooning of the trade surplus. Based on the data available so far, it looks like the biggest decline in imports is in machinery and equipment. Parts and components that go into export processing are still growing at 25% to 30% annually. But machinery and equipment is running at about a third the rate of 2004 — that’s to say at 10% rather than the 30%-plus growth seen in 2004. So what we’re seeing in 2005 was some slowing in the pace of domestic investment. This comes against the background, you’ll recall, of investment growth that began to accelerate in 2002 through early 2004. Then the government got worried about excess investment and overheating, so they started to put the brakes on the economy. This is evidence that the measures they took are starting to bite. What are the strongest export sectors? The big drivers
