China’s trade surplus narrowed last year for the second straight year, giving Beijing grounds to rebuff US pressure for faster currency appreciation ahead of Chinese President Hu Jintao’s (胡錦濤) visit to Washington next week.
The Chinese government will point to the latest numbers as evidence that it is making steady progress in rebalancing its economy toward domestic consumption, cutting reliance on exports and giving the world a lift through surging demand for imports.
For the US, however, this may be happening too slowly, with the politically sensitive bilateral trade gap between the world’s two biggest economies widening further last year.
However, last month was consistent with what has been a pattern since the outbreak of the global financial crisis more than two years ago. With the Chinese economy growing much faster than the rest of the world, imports outshone exports.
China’s exports last month rose 17.9 percent from a year earlier and imports increased by 25.6 percent, the customs agency said yesterday.
That left the country with a trade surplus of US$13.1 billion, well down from analysts’ expectations of a US$20 billion figure and the lowest in eight months.
“Imports are much stronger than we have expected, indicating that the domestic investment and internal demand are mainly pushing up domestic consumption,” said Wang Han, an economist at advisory firm CEBM in Shanghai.
For all of last year, China’s trade surplus was US$183.1 billion, down 7 percent from US$196.1 billion in 2009. The surplus had fallen 34 percent in 2009 from its pre-crisis peak of nearly US$300 billion in 2008.
“This could reduce the pressure for yuan appreciation and also remove some pressure for the central bank to imminently launch aggressive tightening,” said Wang Hu, an economist with Guotai Junan Securities.
Along with quickening the pace of yuan gains, the government raised interest rates twice and banks’ required reserves six times last year to rein in inflation.
A smaller trade surplus means that less money is flowing into China, decreasing the central bank’s urgency to mop up the excess cash in the economy that has pushed prices higher.
Beijing has let the yuan rise 3 percent against the US dollar since mid-June, when it lifted the currency from a nearly two-year peg that cushioned the economy from the impact of the global financial crisis.
Critics in the US say that China keeps the yuan cheap to give its exporters an unfair advantage in selling their wares to the world.
These long-standing complaints have taken on added potency in the wake of the financial turmoil that has left the US with an unemployment rate of 9.4 percent.
However, Beijing has counseled for patience, repeatedly pledging to reduce its economy’s reliance on exports and to seek a more balanced trade relationship with the rest of the world.
It has begun to move in that direction on the back of surging imports of oil, iron ore, copper and other raw materials needed to fuel its economy.
However, apart from agricultural goods such as soy beans, the US provides few of the commodities sought by China. That mismatch showed in another huge trade gap between the two last year: US$181.3 billion, up 26 percent from 2009, according to the Chinese data.
Trade is just one thorn in the side of China-US relations. The two countries also locked horns last year over deadly North Korean attacks on South Korea, Internet censorship, human rights, South China Sea navigation, climate change and valuable rare-earth minerals.
Hu Jintao will meet US -President Barack Obama in Washington on Jan. 19, an event that is being billed as the most important state visit in 30 years.
There are signs that China’s overall trade surplus, having narrowed in 2009 and last year, could rebound this year.
The export order sub-index in the country’s purchasing managers’ index, a leading indicator of export demand, has been very strong of late, Goldman Sachs economists Yu Song (宋玉) and Helen Qiao (喬虹) noted.
Liu Li-gang (劉利剛), an economist with ANZ in Hong Kong, said that improvements in the US jobs market would also shore up global demand.
“We still see a robust year ahead for China exports,” he said.
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