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Chinese trade surplus sets record in just nine months

China's trade surplus this year has already scorched past the record 12-month figure of last year, official data showed yesterday, giving further ammunition to critics of the Asian giant's currency policies.

The accumulated surplus from January to last month was US$185.7 billion, the customs bureau said, exceeding the US$177.5 billion for all of last year.

After three record monthly trade surplus figures in June, July and August, last month's US$23.9 billion dollar surplus was the fourth-largest ever, the customs figures showed. It was also up 56 percent from a year earlier.

"There will definitely be pressure on the currency to rise in value," said Chen Jijun, a Citic Securities economist in Beijing.

On Thursday, Washington filed its fourth WTO complaint against China, challenging its restrictions on imports of copyright-intensive industries such as films and music.

US Treasury Undersecretary for International Affairs David McCormick argued late last month that greater flexibility in the yuan's rate would not damage China's economic growth: "What currency flexibility will do for China is support -- and in fact be a necessary component of -- a growth strategy that brings higher consumption to Chinese households and more balanced, harmonious and sustainable growth."

China's central bank governor has said there was no timetable for making the yuan fully flexible.

Foreign criticism reflects not just general dissatisfaction with China's currency policies, but also practices pursued in individual sectors. This was highlighted in yesterday's customs data which showed that in the first nine months, steel products exports rose 73.3 percent year-on-year, while imports declined 8.2 percent.

European steelmakers are preparing to file a complaint with the European Commission alleging that China's steelmakers are exporting prices below production cost.

But with the focus on China's exports, some economists argued more attention ought to be paid to the role played by imports in bringing about the large surplus.

Exports last month rose 22.8 percent year-on-year to US$112.5 billion, but imports were up by 16.1 percent at US$88.6 billion, the customs bureau said.

"The rather high trade surplus in September is linked to a modest rise in imports," said Li Huiyong, an economist with Shenyin Wanguo Securities. "I tend to think this has come about as a number of local enterprises have started making products that substitute goods that previously had to be imported."
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