On August 6th 2011, ratings agency Standard & Poor’s cut the U.S. credit rating from AAA to AA+. This is the first time such a downgrade has ever happened for the United States. Will this affect trade relations with other countries?
Conflicting Data
Zhou Dewen, president of the Wenzhou SME Development Association, told the 21st Century Business Herald “China’s small and medium-sized enterprises (SMEs) are facing order cancellations after the U.S. had its credit rating downgraded”. However, official and industry data paint a conflicting picture.
China’s National Bureau of Statistics (NBS) and China’s Ministry of Industry and Information Technology acknowledge that SMEs are facing some challenges in their operations, yet believe the overall business environment is still positive.
The China Federation of Logistics & Purchasing (CFLP) data shows that as of July 2011, the Purchasing Managers Index for SMEs has been below its critical point for 3 consecutive months. Conversely, the NBS reports second quarter 2011 showed the SME climate index rose.
Real World Account
According to data from ShippingSpy.com, Chinese based company Sungju Sound has increased exports to the United States. One year of history from July 2011 is up 24% over the same time a year prior. Choi Yun Kil, president of Sungju Sound, said “We have been focusing not only on sales but also on developing new models according to a rapid market change and demand”.
There are many factors with international trade; the credit downgrade, sluggish economy, and U.S. dollar inflation all affect commerce. Perhaps only time will tell if the credit downgrade will impact individual companies.
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