With the global economy recovering, China s trade surplus began to grow.

As incomes in China grow, imports from other low or middle income countries rise faster than imports from high wage countries. China's trade surplus with the US exceeds 100 billion, but it runs a deficit with India.

China's trade surplus with the US exceeds 100 billion, but it runs a deficit with India.

So its trade surplus continues to soar at the expense of other countries.

This is the strongest decline in net foreign demand facing a single country, or, equivalently, the strongest increase in a country s net demand for foreign goods.

This makes the renminbi chronically undervalued and assures China of a persistent large trade surplus.

Germany , Europe s largest exporter, has a very large trade surplus with the rest of the world.

Trade and immigration (legal and illegal), if left unchecked, will continue to exert downward pressure on rich countries labor markets.

China has yet to discover and adopt an alternative growth strategy that does not rely on a large trade surplus.

The US has complained about China s current account (trade) surpluses but, as a percentage of GDP, Germany s surplus is even greater.

So China continues to run a giant trade surplus, and the US continues to spend and borrow.

But the euro area as a whole nonetheless had a trade surplus of more than 30 billion over the past 12 months.

In the end, this may be the most compelling reason for why China should continue to run trade surpluses.

So far in 2009, China s surplus has accounted for 75 of the total US non oil goods trade deficit.

That country has a trade surplus. It exports more than it imports.

In recent years, China also got hooked on a large trade surplus vis à vis the US the counterpart of its undervalued currency.

In recent years, China also got hooked on a large trade surplus vis à vis the US  the counterpart of its undervalued currency.

Japan s trade balance fell into deficit in 2011, for the first time since 1980.

Its launch has sharply weakened the yen and is now leading to rising trade surpluses.

To be sure, China has accumulated an enormous balance of payments surplus, which indicates that the renminbi is greatly undervalued.

They would run down their trade surpluses and, in some cases, allow their currencies to appreciate.

Australia has been a particularly large beneficiary of Chinese growth, which is relatively commodity intensive. This has tended to increase metals prices, fueling Australia s large export surplus in metals.

Manufacturing production has plummeted, the trade balance has deteriorated sharply, and corporate bankruptcies are increasingly frequent.

By 2000, China s bilateral trade surplus was as large as Japan s by 2004, it was twice as large.

The arithmetic of global trade implies that the sum of all trade deficits equals the sum of all trade surpluses. If some countries, say, Japan and China, insist on running huge surpluses year after year, then other countries must run deficits.

The arithmetic of global trade implies that the sum of all trade deficits equals the sum of all trade surpluses.

As a result, China s trade surplus with the US rose from 83 billion in 2001 to 258 billion in 2007, just before the recession.

At the same time, Brazil which has followed sound economic policies and has healthy budget and trade surpluses cannot refinance its debt at acceptable rates.

During the same period, annualized US imports declined by 284 billion more than US exports, and China s annualized trade surplus increased by 249 billion.

In that case, Germany s surplus means that the rest of Europe is in deficit.

So the key determinant of the dollar s long term value is that it must decline enough to shift the US trade balance from today s deficit to a surplus.

Moreover, it is hard to see how anyone even the IMF, as the US proposal envisions could enforce caps on trade surpluses.

But some, particularly American politicians in this presidential election year, focus on only one thing China s trade balance.

China s purchases of American debt effectively transferred the official reserves gained via China s trade surplus back to the US market.

But the downward trend in the trade balance is clear.

And it was after the Communists crushed the pro democracy movement in 1989 that the US helped to turn China into an export juggernaut that has accumulated massive trade surpluses and become the principal source of capital flows to the US.

It is nice that Mexican workers and entrepreneurs are gaining experience in export manufactures, and successful enough to run a trade surplus vis à vis the US.

In the third quarter of this year, China s foreign exchange reserves increased by 194 billion, which far exceeded the country s 66 billion trade surplus and 23 billion in inflows of foreign direct investment.

The northern countries argue that permitting wage growth and boosting domestic demand would reduce their competitiveness and trade surplus. But that misses the entire point surplus countries must contribute no less than deficit countries to global and regional rebalancing, because the world economy cannot export to outer space.

Thus, they would minimize the deterioration in their trade surpluses, maintain competitive exchange rates, and safeguard their foreign reserves and net creditor positions.

The northern countries argue that permitting wage growth and boosting domestic demand would reduce their competitiveness and trade surplus.

And, to be sure, it would very difficult for countries to cap their trade surpluses in practice there are simply too many macroeconomic and measurement uncertainties.

Many emerging markets have run current account surpluses for the first time.

Partly by design and partly by chance, about a decade ago China found itself consistently accumulating large amounts of foreign reserves by running a trade surplus and intervening to buy up the dollars that this generated.

Rising food prices are an international phenomenon, and Russia s inflation is driven by the large current account surpluses and capital inflows.