China Flips Off Geithner (Again) As Trade Surplus Beats Expectations And Surges To Second Highest In Two Years

Tyler Durden's picture

China just metaphorically flipped off the US, and the G-20, by not only beating trade expectations, but trouncing them, with a net positive trade surplus of $27.1 billion, compared to estimates of $25 billion. This was the second highest number since January 2009, and lower only to July's $28.7 billion. The main reason for the surge in exports was the trade balance with the EU, which at $14.5 billion is the highest since October 2008. In other words, Europe's strong currency is already impacting the continent's economic output, as end users opt to import stuff from China, instead of having it produced domestically, and not to mention stockpiling inventory in hopes that pricing power will allow prices to go up (instead of just squeezing margins even more). Ultimately, Europe is the one that is now getting hit by a double whammy of the CNY-USD peg (as the CNY is now at very low levels to the euro), as well as the recent surge in the EURUSD, due to the Fed's policies. Therefore, Europe has to continue battling not one monetary regime, but two, as its net trade balance with both the US and China are getting worse by the month. As for the all important Chinese trade balance with the US, it came flat with September, both at $18 billion, even though both imports and exports declined proportionally. Elsewhere, and possibly in anticipation of increasing inflation dangers and overheating, but still unwilling to depeg from the USD, Bloomberg reports that China has ordered some banks to raise reserve ratios by another 50 bps. This will be the second such move in under a month - last time it was another 50 bps move to 17.5%. Of course, this is no different than putting a cork in the proverbial dam.

Below are China's total gross and net monthly imports and exports.

Trade balance by country:

Note the surge in the trade balance with Europe:

More importantly for Chuck Schumer, there is no improvement whatsoever in the China-US trade balance, which was identical to September.

And lastly, the trade balance of China with the rest of the world.