Did China cook the books on its trade deficit? Unlikely.
China's first reported trade deficit will ease international pressure to raise the value of the currency. Although some critics say China cooked the books, it's hard to lie with trade statistics.
This deficit will likely to prove temporary as the numbers aren't seasonally adjusted and as China's exports (and trade surplus)is highest in the second half of the year, when Chinese manufacturers delivers toys and other Christmas-related goods.
Even so, the trend is clearly for the Chinese surplus to fall, contrary to the predictions of some so-called trade experts. This will likely ease the attacks on the Chinese currency peg.
I should in this context comment on the fact that some people have argued that this deficit is too convenient to be true and that the Chinese statistical authorities are "cooking the books" on this issue to ease foreign attack on the currency peg.
While it can't be ruled out that Chinese authorities have manipulated the numbers slightly, the larger picture is highly unlikely to be false. Why? Well, because trade numbers are reported by both the export nation and the import nation.
If China were to report a $7.2 billion deficit even though in reality they had a surplus, we would see a big discrepancy relative to numbers reported by China's trading partners. For this reason, it is much more difficult to get away with manipulating trade statistics than other statistics.
Knowing this, Chinese statistical authorities will in order to ensure their credibility refrain from any significant manipulation. Meaning that the reported trade numbers are likely to be basically correct, with at most only minor deviations from the real numbers (or at least minor intentional deviations).
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.