US economic slowdown seems to have finally hit China. China’s trade surplus unexpectedly experienced a sharp fall in February. This sudden fall was not expected given the 48% record growth in the country’s trade surplus in 2007. The gap between China’s exports and imports had expanded to $262.2 billion last year.

USA, one of the major importers of Chinese goods had accused China of keeping its domestic currency Yuan undervalued to keep Chinese exports cheap. The West has also urged China to open up its domestic economy to foreign investment and allow greater imports. The surge in 2007’s Chinese exports had occurred despite of a number of product safety issues concerning Chinese goods including toys, toothpastes and clothing items. Beijing has introduced measures such as export tax on steel and some other goods to contain excessive export growth, which it fears might overheat the Chinese economy.

The Chinese export control measures had seen smaller trade surplus last December. The decline in February’s trade surplus can be attributed to the Chinese export control measures alongside with the adverse effect of the low US demand. Inflationary pressures are also feared to have contributed to increased production costs. Rise in prices of coal, iron ore, fuel along with upward trend in labour cost is adding to the cost of export goods.

Source: BBC
Image: ChinaDaily