Very quickly – since the German constitutional court awaits this morning:
China’s trade surplus jumped 43pc to almost $32bn in June. Imports for domestic consumption fell sharply.
This is exactly the sort of development that I alluded to in yesterday’s blog, subject to all the usual health-warnings about a single month’s data.
It implies that China is no longer consuming enough of its own output. It is exporting excess manufacturing and industrial capacity – with an undervalued currency – into a world that is already grappling with a deep secular slump.
(China is not the worst or only offender in this respect. Germany’s current account surplus under the fixed D-Mark racket – the euro – is far higher as a share of GDP. But China is the world’s second largest economy, so it matters.)
It transmits a fresh deflationary impulse to a world already dangerously close to deflation. This is a greatly under-estimated risk.
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