What I noticed was that Chinese government really organized things really well to support their trade. Sure, US and Europe are still the main destination for Chinese goods. But China has built connection all over the world, even in Iraq and Afghanistan. Even without US or Europe, China will still be able to sell their goods to emerging markets and their own domestic market. Recently, there is also news that China and Germany will launch a rail cargo between two nations.

As good leadership is not enough, the Chinese productivity is also amazing. They’re willing to work longer hours. Some people say they’re enslaved, but that is just pure ballooney. They should go to the factories in China and talk with the workers themselves.

I fail though to see why exchange rates don’t matter to contract manufacturers. The recent trend (see the world bank’s work on this, and the IMf’s work) has been to subsititute Chinese components for imported components. This presumably has something to do with the exchange rate. And if the RMB rises, contract manufacturers would look elsewhere. If the cost savings on production in China are not large enough, US and European MNCs would source production in their home markets (see the Wall Street Journal story in my next post).

Finally, the empirical evidence strongly suggests Chinese — meaning goods production in China, whether by Chinese firms, Asian contract manufacturers or US/ european firms — exports does respond to the real exchange rate. Goldman found that a fall in the real value of the RMB significantly increased China’s export growth. And the pattern of Chinese trade with Europe provides prima facia evidence that the exchange rate matters. Do you really think China’s (with China defined in the BoP sense to include goods produced in China by foreign enterprises) current export surge to Europe is unrelated to the huge fall in the RMB v the Euro?

finally, China’s export model has moved beyond the Asian norm. Other Asian economies never ran 10% of GDP current account surpluses during the investment phase of their development. such large surpluses are also new for China — and perhaps not coincidentally, they emerged only after the rmb joined the dollar in a broad based depreciation against the world.

Thank you for checking into the growth of US and Chinese exports to oil-exporting economies.

Howard

Mheck — thanks for catching my error. If China makes up for its rising oil import bill with a rising surplus with Europe, i think europe ends up being the region that absorbs the biggest swing in its current account position: higher oil, offset in part by higher exports to the oil-exporting economies and a larger deficit with China.

http://www.allroadsleadtochina.com/index.php/2008/06/11/paulson-remarks-on-4th-round-of-us-china-strategic-economic-dialogue/#more-778

Probably you mean ‘other oil *importers*’. You may correct this, if you want to publish this elsewhere.
But even then, one could as well say, the surpluses of oil exporters have to shrink correspondingly…