By Kenneth Fung

WASHINGTON (MNI) – The United States’ August Trade Balance is
likely to fuel the ongoing debate over China’s foreign exchange policy
and widening global imbalances, providing yet more ammunition for U.S.
lawmakers to take shots at the Asian giant.

The trade balance, to be released by the Bureau of Economic
Analysis Thursday morning, is expected to show a deficit of $44.3
billion according to a survey of economists by Market News
International. Data for July showed a deficit of $42.8 billion with
exports amounting to $153.3 billion and imports $196.1 billion.

Scott Brown, chief economist at Raymond James, sees “enough growth”
in the domestic economy for a rebound in imports. He adds that the
August data will continue to show a “correction from the global
recession, leading to greater global imbalances too.”

With the unemployment rate at 9.6%, and the economic recovery
stuttering, many U.S. politicians have taken aim at China’s large trade
surplus, accusing the world’s largest exporter of deliberately devaluing
its currency to boost exports at the expense of U.S. industries.

At the end of September, the U.S. House of Representatives
overwhelmingly passed a bill giving President Obama authority to impose
tariffs on countries with fundamentally undervalued currencies.

The House bill would clarify current law to allow the Commerce
Department to impose countervailing duties on Chinese goods to offset
the effect of the country’s currency policies.

On the Senate side, Finance Committee Chairman Max Baucus told
reporters in Beijing Wednesday that there is a “very real possibility”
that the Senate could pass its own currency bill.

He was speaking just hours after the Chinese government announced
that its politically charged trade surplus fell to a five-month low on
record imports.

But the People’s Bank of China later reported that the country’s
foreign exchange reserves surged a record $194 billion during the third
quarter to $2.65 trillion.

In remarks during the semiannual meetings of the IMF and World Bank
over the weekend, U.S. Treasury Secretary Geithner said “it is critical
to see more progress by the major emerging economies to more flexible,
more market-oriented exchange rate management. This is particularly
important for those countries whose currencies are significantly
undervalued.”

Then in an interview Tuesday night on PBS with Charlie Rose,
Geithner added that he hoped China would allow its currency to
appreciate at a “gradual but significant rate.”

–Kenneth Fung is a reporter with Need to Know News in Washington

** Market News International Washington Bureau: 202-371-2121 **

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