Both US trade deficit & China trade surplus prevailing!

Another record-breaking trade deficit:

U.S. reached a huge trade deficit record of 68 billion U.S. dollars in July 2006 that higher than the 64.8 billion U.S. dollars in June.

On the other hand China's trade surplus has risen to a new record high:

In August China's trade surplus has risen to a new record high to 18.8 billion U.S. dollars. From January to August 2006, China's total trade surplus was 95.65 billion U.S. dollars and the gross value of imports and exports reached 1.1046 trillion U.S. dollars during the period.

Flooding the booming economy with cash, in fact China has enough foreign reserves and thus experiences appreciation pressure in the Renminbi currency. The surplus scenario took the Renminbi to its strongest since July of last year. The policy maker (People's Bank of China Governor Zhou Xiao Chuan) should find way to curb foreign-exchange reserves, otherwise China would suffer loss from holding such a huge amount of foreign reserves which consists mainly in the form of U.S. dollars.

However, the appreciation process seems to be slow due to the concern of the impact on the economy. The idea of linking the HK$ to Chinese yuan is dangerous at the moment since Reminbi is not a freely tradable currency in the foreign exchange market. The action may lead to the depreciation of the asset value of the HKSAR (just vs the appreciation of the currency).

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