24/7 Wall St.

A rumor that China’s exports rose 50% compared to last May drove China’s markets up over 2% at the close of trading. It turns out that the numbers were correct. According to Reuters, most experts expected the increase to be closer to 30%.

The news shows the growing strength of the US economy. China exports to the EU are hardly likely to be rising quickly because of region’s lagging GDP growth and high unemployment. China’s rising exports will likely increase the debate over the value of the yuan, particularly if US government reports do not show a sharp increase in American exports. China, the Administration will argue again, does as well as its does in selling its manufactured goods around the world because it has a currency edge along with low labor costs.

If the current labor unrest in China is any indication, the cost of goods from the People’s Republic will rise. The US has already been fighting the dumping of some Chinese products. The push to get China good into the US will only increase as the mainland is pressed by a need raise prices to offset increased labor costs.

That leaves the issue of the yuan as the outstanding one in the trade relationship between the US and China. The Treasury skipped a chance to name the People’s Republic as a “currency manipulator” in April. There has been a great deal of diplomacy about the reset of the yuan’s value since then. The negotiations have boiled down to China making half-gestures to let the yuan float on global currency markets followed by a backing away from those implied promises.

China’s exports are surging. America is recovering. Meanwhile, a trade confrontation which has no precedent is the modern era is emerging.

Douglas A. McIntyre