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Monday, January 29, 2007

EU current account balance with China

In a previous life I studied international trade. That's about as far as my expertise in these matters goes. However, I came across this five page report on the EU's current account balances. One interesting fact that I wasn't aware of: the EU25's current account balance with China is approximately -115B euros or (at current trading rates) -150B dollars (assuming 0.77 euros to the dollar).

Our current account balance with China? About $200B per year, give or take.

The two current account deficits are much closer than I would have imagined, and definitely more than implied on the evening news. One gets the feeling that the U.S. alone has a current account deficit with China and that for some reason our political class is letting Walmart and company get away with something.

Of course, when the average manufacturing wage in China is 3% of the prevailing average manufacturing wage in the United States (and likely a similar relationship with European manufacturing wages), it is unlikely that any developed country will have a positive current account balance with China in the near term.

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