The Chinese authorities are keen to point to official policies aimed at reducing the surplus, but the US driven global economic slowdown probably had more impact. The slowdown has reduced the buying power of the majority of countries that import from China in significant measure; it has also caused the value of the US$ to fall against most major currencies, including the RMB. Another major factor was the rising price of energy resources, with the higher prices of imports of energy reducing the dollar value of the trade surplus.

Why is this good news in relation to the US election?

During Ohio’s Democratic Party primary election Obama sounded awfully protectionist, and China was the implicit if not explicit target. The reality is that good trade policy makes bad politics, and good politics make bad trade policies. Though it might have nothing to do with trade policy, falling Chinese trade surpluses (and falling US deficits) will take some of the pressure of US trade politics.

If trade policy can be kept out of the politics of the US elections, so much the better.

—–

Update: The Democratic Party has just announced its Party Platform (pdf) – instant evidence of the conclusion above: trade needs to keep a low profile in this election.