China’s Trade Surplus With U.S. on the Rise : Pacific Rim: The figure is triple what it was two years ago. Observers say the imbalance could further disrupt relations between the two nations.

In the past year, while human rights issues have taken center stage in Sino-American relations, China has been quietly but rapidly building a significant trade surplus with the United States--one that soon may be second in size only to that of Japan.

Analysts in China and abroad say the mounting trade surplus could further irritate already-rocky relations between the United States and China. At the same time, some analysts say, the trade surplus also could provide the United States with greater potential leverage in encouraging China’s leadership toward political reform.

U.S. diplomats in Beijing project that the trade surplus--fueled largely by a dramatic increase in Chinese exports to the United States--will exceed $10 billion this year. That represents roughly a 300% increase in two years.

By year-end, China is expected to surpass Taiwan to become American’s second-largest deficit trading partner. Japan is the largest, with an annual surplus of about $45 billion.

The ratio of U.S. imports from China to its exports to China is now greater than 3-to-1, by far the highest for all U.S. trading partners and giving credence to the claim of some U.S. exporters that China’s centrally controlled import market is the hardest in the world to crack.

China has been building its trade surplus with the United States even as the United States has been reducing deficits with Japan, Taiwan, South Korea and Hong Kong, its other major East Asian trading partners.

U.S. deficits with those Asian nations became politically charged issues in the 1980s, despite those nations’ relatively strong ties with America.

“As this deficit really begins to penetrate the public consciousness in the United States, I think we’re going to have a strong public reaction here,” said Michel Oksenberg of the University of Michigan’s Center for Chinese Studies. “It could well become a very serious, additional irritant to the (Sino-U.S.) relationship.”

Added a Beijing-based Western diplomat: “For the United States, China sticks out like a sore thumb these days when it comes to trade. There are already enough people in Washington opposed to China. If China’s trade imbalance with the United States continues to grow, it could reach a point where a buzzer goes off.”

Until now, even as Congress has been debating renewal of China’s favorable trade status, that buzzer has not gone off. The rapid change in Sino-American trade has remained largely a tangential issue in Washington, and the U.S. Embassy in Beijing has had only limited discussions with the Chinese on the issue. But some analysts say America’s growing importance to China’s export industries--it is now China’s largest export market--creates new political opportunities for the United States.

They note that the continuing debate over China’s “most-favored nation” trade status with the United States induced China this spring to grant some political concessions, such as the release of hundreds of people arrested after the crushing of last year’s pro-democracy protests and the decision to allow Chinese dissident Fang Lizhi to leave China after spending a year in the American Embassy.

“If the trade relationship is used correctly,” Oksenberg said, “it could give us the possibility of some leverage with the Chinese. A lot of Chinese companies are now really counting on the American market, and they wouldn’t want to lose it.”

In discussions with U.S. officials, however, China will not even recognize a trade imbalance with the United States.

Chinese officials are able to do this because of a disagreement over how the two nations measure their trade: China excludes from its U.S. trade data the large amount of Chinese goods exported to the United States through Hong Kong, while the United States includes Hong Kong transshipments in its China trade data.

According to U.S. data, the major source of China’s trade surplus is soaring exports, particularly shoes, clothes, toys and electronics. Overall, Chinese exports to the United States are up about 35% for the first four months of the year, and the U.S. Embassy estimates that the total amount will be almost double that of 1988.

Major reasons for the surge include a massive shift of Hong Kong and Taiwan export-oriented manufacturers to plants in southeastern China, as well as a 22% devaluation of Chinese currency in December, which cheapened Chinese-made goods against the dollar.