China’s foreign reserves have risen past $1.2 trillion, bolstered no doubt through unfair trade practices and currency manipulation that have helped to create a $233 billion trade imbalance with the U.S. Today, the WSJ (subscription required) looks closer and raises interesting questions.

“The rise is far more than economists had expected – and more than can be explained by reported flows of money into the country…after subtracting the first quarter’s $46.4 billion trade surplus and $15.9 billion in foreign direct investment from the increase in reserves, a gain of $73.3 billion remains that cannot be explained by those documented flows.”

Speculation is that the increases can be explained through possible foreign-currency swaps, and…

“Few economists say unexplained sums of $50 billion to $60 billion could cross China’s borders without notice.”

Yet, there it is, $73.3 billion that can’t be explained. Once again it looks like China is playing by its own set of rules and as the WSJ points out in this case, “the explanation matters.”

China is the world’s fourth largest economy…and growing. What’s clear is that the lack of transparency means we don’t know what we’re dealing with. It’s a scary thought given the ripple effect China’s economy can have on the rest of the world.

This entry was posted on Friday, April 13th, 2007 at 7:15 pm and is filed under Holding China Accountable, Currency Manipulation, Enforcing Trade Laws. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.