From Overseas Press

China's rise to No. 2 may stoke trade fires

(chinadaily.com.cn)
Updated: 2010-08-20 14:21

Now that China is the world's second-largest economy, Europe and the US are bound to turn up the heat on the gaping trade imbalance, said an article in Newsweek magazine on Aug 16.

According to the article, China's stride past Japan, its heavily industrialized neighbor, sends a powerful message that China is no longer an emerging economy. "China has to come to terms with a greater international responsibility. China has to play fair," said Bernard Baumohl, executive director of the Economic Outlook Group.

As the US and Europe complain that China keeps its trade gap high by manipulating its currency and shielding its own companies from competition, America could push for China to reduce its trade imbalance, said the article. "China is now the second-largest economy. It becomes increasingly hard to defend all these protectionist policies," Baumohl said.

Moreover, with China's rise to the No. 2 economy, said the article, politicians in the US may have additional firepower to seek retaliatory measures, which could be bad for both sides. "With the US trade deficit at its largest in more than two years, Sen. Charles Schumer of New York has been pushing for a bill that could hit Chinese companies with a new round of tariffs."

David Wyss, chief economist for Standard & Poor's, said that a new round of protectionism in the US could be destabilizing to both economies.