China now relies on American exports

A deteriorating Chinese economy, affected by a further slowdown, has become a cause of concern for the United States officials and the two presidential campaigns, as Chinese companies is showing grater dependence on exporting to the American market.

What is reason of China becoming so much reliant on American exports?

• The decline in the real estate and widespread layoffs in the construction sector, accompanied with lethargic growth in retail sales and falling exports to Europe has resulted into greater reliance  on exports to the United States, the sector which is still little affected.

What has been the impact due to this?

• The increased export from china has resulted into rise in American trade deficit and that too in an election year. The bilateral deficit expanded 10.2% in the first five months of this year (2012). The deficit is expected to swell further. China is currently facing a slump in its growth. As per China’s official statement the country is growing at the rate of 7.6% which is much lower compared to the same period previous year when it was 9.5%.

How can this affect Presidential elections in U.S.?

• The rise in China’s exports to America has led to widening of trade deficit of the latter. This could adversely impact US economy. Further, increase in Chinese products selling in America will compete with US products and create pressure on them. The president administration is already under constant pressure from labor unions to take a more opposing stance toward China on trade. All these issues can become crucial in campaigns in presidential election. 

Month: Current Affairs - July, 2012