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Chinese trade surplus drops on demand

China's politically sensitive trade surplus plunged last month as US and European demand for Chinese goods weakened and the country's imports rose sharply, the government reported yesterday.

The 63 percent drop in the trade gap from the year-earlier period reflected the impact of a US slowdown while China's own expansion has stayed robust, driving demand for imported energy, consumer goods and industrial equipment.

China is under pressure from the US and the EU to ease import barriers and currency controls that they say are adding to its multibillion-dollar surplus. Some American lawmakers are calling for trade sanctions.

China's trade surplus last month totaled US$8.6 billion, down from US$23.7 billion in February last year, the customs agency reported.

It was the smallest monthly surplus since March last year, but that month's US$6.9 billion gap was considered abnormally low in a fluke caused by changes in export-tax policy. It has been two years since China regularly posted monthly trade surpluses under US$15 billion.

Last month's trade balance might have been affected by severe winter storms that disrupted shipping, caused shortages of food and raw materials and forced some factories to suspend production.

China's imports last month surged 35 percent to US$78.8 billion from the year-earlier period, the customs agency said.

Exports grew 6.5 percent to US$87.4 billion -- a much slower growth rate than January's 26 percent. That could spur worries that slowing US demand will hurt Chinese exporters and could wipe out thousands of jobs.

Chinese leaders said they were not actively pursuing a large trade surplus and want balanced trade. Beijing is trying to encourage China's own consumers to spend more in hopes of reducing reliance on exports and industrial investment to drive growth.

Last month's monthly trade gap with the US, China's No. 2 trading partner, shrank 23 percent to US$9.4 billion compared with the same month last year, the customs agency said.

China's exports to the US fell 5 percent last month to US$16.4 billion, while imports of US goods jumped 33 percent, reaching US$6.1 billion.

The surplus with the 27-nation EU -- China's biggest trading partner -- narrowed by 15 percent to US$10 billion, data showed.

Chinese and EU officials are due to meet next month in Beijing to launch a regular high-level dialogue aimed at defusing trade tensions. China also conducts similar twice-year meetings with the US.

The US, EU and other trading partners are pressing Beijing to ease controls that they say keep its currency undervalued and give Chinese exporters an unfair price advantage.

Chinese Premier Wen Jiabao (溫家寶) said last week that Beijing would pursue a more flexible exchange rate.

The yuan has been allowed to rise by about 16 percent since the middle of 2005 and a faster increase would help to narrow the trade gap by making China's goods more expensive abroad and making foreign imports more attractive to Chinese consumers.

But concern over possible job losses has prompted trade officials to argue against letting the yuan strengthen faster.

The flood of import revenues also is straining the central bank's ability to rein in pressure for prices to rise.

Consumer inflation rose to 7.1 percent in January, its highest level in 11 years and is expected to surpass that when figures for last month are reported this week.
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