Tue, Feb 13, 2007 page11

• China's surplus widens due to seasonal factors

  NEW YEAR SPIKE Analysts said the reason for the 67 percent rise year-on-year was that last year the New Year holidays fell in January, resulting in fewer working days

  • AFP
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  China's trade surplus rose 67 percent last month from a year ago, official data showed yesterday, a rise likely to further fuel tensions despite analysts saying seasonal factors were behind the spike.

  Based on data from China's Customs Administration, last month's trade surplus rose to US$15.88 billion, up 67.3 percent from US$9.49 billion in January last year.

  The figure last month, however, fell 24 percent from December when China recorded a hefty US$21 billion surplus.

  According to the customs bureau, exports rose 33 percent year-on-year to US$86.62 billion, while imports reached US$70.74 billion, up 27.5 percent. The bureau did not itself provide the monthly surplus figure.

  Analysts said the rise compared with the same period a year ago was due to seasonal factors involving the Lunar New Year, which this year falls in the month of February rather than in January as it did last year.

  "The Spring festival this year is in February and that's why both exports and imports have increased year-on-year," said Sun Mingchun (孫明春), chief economist at Lehman Brothers based in Hong Kong.

  As the holiday fell in January last year, it meant there were fewer working days.

  Sun added that trade flows were traditionally weaker at the start of the year than the end, which explained why the figure last month was lower than in December.

  The January figure was the lowest trade number since October, when China's roaring economy pushed the surplus to a record US$23.8 billion, but analysts said the seasonal skewing rendered the monthly fall nearly meaningless.

  "We don't think the January figure really reflects anything meaningful," said Qian Wang, an economist with JPMorgan Chase Bank based in Hong Kong, adding she expected the monthly surplus to average US$20 billion this year.

  Such a forecast could further aggravate already tense trading relations with its major trading partners after Chinese commerce regulators pledged to focus on trimming last year's record surplus of US$177 billion.

  That record figure prompted Commerce Minister Bo Xilai (薄熙來) to warn last month that China's mounting surpluses were becoming more of a problem in relations with its major economic partners.

  Bo stressed that China had to take new steps to rein in exports or face a trade surplus of about US$300 billion, a level that would almost certainly trigger angry protectionist measures in Washington and Brussels.

  Both Brussels and Washington have pressured China to address the surplus by calling for its currency, the yuan, to appreciate more rapidly, arguing that it is still sharply undervalued against all the major currencies and makes Chinese exports far too cheap.

  China has resisted the pressure to allow a sharp appreciation, instead allowing the yuan to rise a little more than 6 percent since it was de-linked from its 8.28 yuan peg to the US dollar and re-valued in July 2005.

  However China has also acknowledged that a large trade surplus is not necessarily good for its own sustained economic growth and plans are afoot to abolish some favorable tax policies for exporters.

  The government also intends to reduce exports of high energy consuming and low value-added goods through other non-tax measures.

  Last month, total trade between China and the EU reached US$26.4 billion, while trade with the US registered US$23.41 billion, according to the data.
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