As exports boom, China risks global backlash

As exports boom, China risks global backlash from trade sanctions elsewhere in the world.

After years of running large trade surpluses with the United States but showing deficits with many other countries, China is exporting at such a rapid rate that it is shifting its global trade balance faster than anyone had expected. And the resulting boom for China is certain to step up trade frictions with countries around the world and increase pressure on Beijing to let its currency appreciate.

The problem with trade sanctions is that they would their own multinationals.

Computers, clothing and office furniture are now flowing from China to Germany and Italy in ever growing quantities. So are Chinese exports of synthetic dyes to the Netherlands and railroad locomotive parts to Canada, both of which have more than doubled. "January and February were pretty busy," said Li Na, who works in the international sales department at Landbond Furniture, a large furniture company based in Guangdong Province that ships mainly to Europe and the United States. "The exports for those months increased between 20 and 30 percent."

But economists say this is not just the effect of the foreign multinationals building up their Chinese production facilities," said Stephen Roach, the chief economist at Morgan Stanley. "After years of investment, it's all coming together big time."

When the capitalist owned production facilities in their own countries, trade barriers made sense to them. Nowadays, globalisation is making the capitalist concept of a country irrelevant.

This is leading to instability within the international trade system as witnessed by the pegging of the Yuan to the USD. And everybody is worried about how this will turn out.