China faces mounting financial risk even as an innovation drive aimed at rebalancing the economy away from low-value manufacturing falls short, according to a report by the Organization for Economic Cooperation and Development. – Wall Street Journal (subscription required) China’s exchange reserves: The PRC’s stockpile of international currency unexpectedly rose above the US$3 trillion level, according to the People’s Bank of China, reports Steve Wang. The rebound in reserves adds weight to the efforts of Chinese authorities to curb outflows through tighter surveillance of capital flows in the banking system that follows seven straight months of declines in the forex treasure chest with a drop of US$41 billion in December and US$12 billion in January. China trade deficit: State-owned enterprises were a key driver behind China’s resoundingly strong import figures for the first two months, that jumped 51.7% from a year ago to 466.7 billion yuan (US$67.6 billion), reports Steve Wang . State-owned enterprises’ hunger for iron ore and crude oil, along with other basic industrial materials, have pushed China import figures to their best start since 2011. Christopher Whalen writes: As the new government of Donald Trump engages with Beijing in areas such as trade and economics, Washington needs to appreciate that the economic situation in China is changing rapidly and has significant political ramifications. Rising wages and prices are eliminating China’s relative advantage in the global competition for investment and production, while higher productivity nations, such as the United States, are actually becoming more alluring. – The National Interest
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