U.s. Financial Crisis On China's Foreign Trade

Since 2008, the US financial crisis, which was caused by the subprime mortgage crisis, has become increasingly fierce. Many financial institutions both in the United States and the European Union went bankrupt; five big investment banks in Wall Street collapsed, then the crisis spread quickly to the rest of the world. The world economy and trade have been adversely affected, with major developed economies such as the United States, European Union, Japan experiencing recessions while some export-dependent emerging market economies were also severely affected by a sharp drop in international commodity prices. This situation poses a threat to these countries economic development. Because of its long-term pursuit of export-promotion strategy, under the slow down in external demand, China's foreign trade in the second half of 2008 fell dramatically, foreign trade surplus has also substantially declined.This paper first analysed the causes of the U.S. financial crisis and its spread to other countries. Then proceed by examining the impact of the crisis on the world economy and trade. The economic recession in the country's major export markets has led to a sharp contraction of its exports. Again, the article investigated, with more focus on Sino-US trade; on the extent at which the crisis has affected the country's foreign trade. Finally, the article suggested foreign trade strategy and policy options.The occurrence of the crisis made us realize that our country's export-oriented trade development strategy is unsustainable, and the adjustment of China's trade development strategy has become more urgent. The crisis makes us see that it is necessary to change the country's model of economic development and trade strategy. In this paper, as an innovation point, the writer discussed the background of the crisis in relation to the Sino-USA trade imbalance and RMB exchange rate issues.