China, South Korea, Japan Build Trade Surpluses on ECB, Fed Economic Stimulus

The three powerhouses of East Asian economy – China, Japan and South Korea – account for nearly a quarter of global demand and output.

But before you call them – as most people do – the engines of world economic growth, please note that they sold last year an estimated $560 billion worth of goods and services more than they bought from the rest of the world.

Since the balance of payments of the world has to balance, these surpluses are other countries’ deficits. And as much as trade surpluses are net contributions to GDP growth, trade deficits are net subtractions from deficit countries’ economies. That is why you sometimes hear that countries running systematic trade surpluses live off their trade partners.

It is a small consolation to deficit countries and the industries devastated by their foreign competitors that some of the funds generated by trade surpluses come back to support – temporarily – their consumption. Particularly vexing for deficit countries is when these trade surplus funds come back to take control of their industries.

CNBC

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Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam