Exports to China surge, no thanks to the yuan

FORTUNE -- U.S. exports to China remained surprisingly resilient throughout the recession, holding steady last year while dropping nearly 20% to the rest of the world.

Even better news? U.S. exports to China rose 39% in the first five months of this year, to $38.5 billion, according to a new study from the US-China Business Council (USBC), which tracks exports by state. Those numbers put the value of U.S. exports on track to exceed a record $90 billion this year. U.S. exports to China totaled $69.6 billion in 2009, more or less equal to the 2008 figure of $69.7 billion. They've already risen 330% since 2000, when China joined the World Trade Organization, compared to rising only 29% to the rest of the world.

California, Washington, Texas, and Louisiana topped the list of exporting states, sending primarily computers and electronic equipment, farm crops, and chemicals to Chinese shores, according to the USBC report. Transportation equipment and waste and scrap materials rounded out the list.

Ohio, Pennsylvania, Illinois, and Michigan also remained among the top 15 exporting states to China. "Even with a global recession, American businesses and American workers continue to benefit from expanding opportunities to sell high-value manufactured goods to the China market," says USCBC President John Frisbie. "China is the only major trading partner to which U.S. exports are growing fast enough to meet the President's goal of doubling exports in the next five years."

China is now the third-largest export market for U.S. products and the fastest-growing by far. Export growth to the other top U.S. export markets in the 2000-2009 period -- Canada, Mexico, Japan, and Britain -- has been significantly slower, the USCBC says.

Trade deficit still a political problem

But good news about China doesn't mean Congress is going to call off the dogs any time soon. As of the end of the first quarter of 2010, the U.S. trade deficit with China still totaled $227 billion, meaning China still exports way more goods to the U.S. than we export to China.

"The overall gap in U.S.-China trade is massive," notes Daniel Rosen, a principal at the Rhodium Group consultancy and a visiting fellow at the Peterson Institute for International Economics. "Even if our exports to China outpace our imports' growth, this imbalance will remain politically electric for a decade."

A revaluation of the Chinese currency, the yuan, in June wasn't nearly enough to make a dent, he says. Benn Steil, Senior Fellow and Director of International Economics at the Council on Foreign Relations, calls the revaluation a "head fake," noting that China was under tremendous pressure in the run-up to the G-20 summit in Toronto in June to loosen its currency peg to the dollar.

House Ways and Means Committee Chairman Sander Levin had said on June 16th: "If China does not act and the administration does not respond thereafter, the Congress will act." Just a few days later, China relaxed the peg and the yuan did rise. Yet since July 2, five days after the summit, the yuan's rise has ceased, Steil notes.

For legislators, particularly those representing U.S. states hard hit by recession, it's a much bigger issue than currency. They are concerned about China's own investment behavior and its aid approach to developing countries, among other issues.

But at least some of them -- particularly those from states benefiting from the surging exports to China -- can at least take some consolation from the latest trade figures.