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China's exports rise sharply, widening trade surplus

The late Mao Zedong's face is seen on a pack of bills of Chinese yuan, in this file photo. PHOTO: AP

Chinese exports climbed steeply last month while growth in China's imports faltered, producing an unexpectedly wide trade surplus that is likely to further upset China's critics in the US, Europe and Japan.

China's announcement on Friday of a US$10.46 billion trade surplus for last month came just two days after the Treasury Department in Washington decided not to accuse China of manipulating its currency to gain a trade advantage. But that conciliatory gesture by the US has not been matched by the Chinese. While the Chinese foreign ministry welcomed the Treasury's decision on Thursday, the Chinese central bank has allowed the currency to weaken gradually against the US dollar for the last two days despite urgings from trading partners to let the currency appreciate.

April is usually a slow month for Chinese exports because factories have not yet stepped up the manufacture of toys, clothing and other products that will end up as presents under Christmas trees in the West. The last time China ran a monthly trade deficit was in April 2004, when it posted a deficit of US$2.25 billion.

Rising exports last month show that global demand for Chinese goods is stronger than most experts had expected, said Qu Hongbin (屈宏斌), an HSBC economist who specializes in China.

"The Chinese trade surplus is not going to narrow significantly in the short term," he predicted.

Chinese exporters, a powerful interest group, strongly oppose faster appreciation of the yuan. Sherman Wang, the general manager of the Hangzhou Kailai Neckwear and Apparel Company, said that the company had barely been able to raise prices for the garments that it exports.

"Our customers are long-term customers, so we still have not encountered cases where the customers stop trading with us," he said. "However, if we raise our prices further, even our old customers may not be able to take it."

But the brisk pace of China's economic expansion may be starting to take a toll in terms of inflation, as companies bid up workers' wages and landlords are able to raise rents. The consumer price index was 1.2 percent higher last month than a year earlier, the government also announced on Friday, accelerating from inflation of eight-tenths of a percent recorded in March.

Prices are rising despite considerable political pressure on electric and water utilities to avoid price increases, and despite government caps on gasoline and diesel prices that have kept fuel prices at a little over US$2 a gallon, well below world levels.

"The real inflation pressure is greater than the headline CPI," said Ma Jun (馬駿), an economist with Deutsche Bank.

In the US, the Commerce Department said on Friday that the overall US trade deficit had narrowed slightly, to US$62 billion, in March from US$65.64 billion in February. The bilateral deficit with China also narrowed in March, to US$12.9 billion from US$13.87 billion in the previous month.

The US is a month later than China in releasing trade figures because US officials wait until they have detailed information available on trade by country and by product. Each month, China quickly releases its overall exports, imports and trade balance and its trade statistics for a handful of products, as it did on Friday, but does not provide full details by country and product until weeks later.

By holding down the value of the currency, China makes its exports more competitive.
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