Thu, Oct 14, 2010 page10

• China’s trade surplus down last month

  EXPERIENCING SHRINKAGE: China’s trade surplus was over US$3 billion less than it was in August and comes as the country set the yuan’s strongest parity rate since June

  • AFP AND BLOOMBERG, BEIJING AND WASHINGTON
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  China’s trade surplus shrank last month as growth in exports and imports slowed sharply, official data showed yesterday, but the decline was unlikely to ease pressure on Beijing for a stronger yuan.

  The country’s trade surplus fell to US$16.88 billion compared with US$20.03 billion in August, and was the lowest surplus in five months.

  The figures come as China set the yuan’s central parity rate — the middle of the currency’s allowed trading band — at 6.6693 to the US dollar, its strongest since a June pledge for limited currency reform.

  However, the data is unlikely to calm angry US and European lawmakers, who are demanding that China let the yuan appreciate faster against the US dollar.

  “I think the pressure is still going to be there,” Brian Jackson, a Hong Kong-based senior strategist at Royal Bank of Canada, told reporters. “I think the fact that their exports are still very strong suggests that there’s plenty of scope for them to do more on the currency.”

  China’s exports rose by 25.1 percent last month year-on-year to US$144.99 billion, compared with an increase of 34.4 percent in August, the data showed.

  Imports rose 24.1 percent on-year last month to a record-high US$128.11 billion, but slower than the 35.2 percent growth recorded in August, the report said.

  The slower growth was due to the high base effect last year rather than weakness in the global economy, Bank of America-Merrill Lynch analyst Lu Ting (陸挺) said in a research note.

  Beijing-based Citigroup economist Ken Peng (彭墾) told reporters that despite the slowdown in exports and imports growth last month, the data remained very strong and would “not stop the calls for more appreciation” in the currency.

  The country’s foreign exchange regulator said on Tuesday that reforming the yuan exchange rate did not equate to currency appreciation and that market players should get used to “two-way fluctuation in the yuan exchange rate.”

  Yesterday, the People’s Bank of China said in a statement that China’s foreign-exchange reserves, the world’s largest, surged to a record US$2.65 trillion at the end of last month, adding fuel to complaints that the nation’s currency intervention is undermining the global recovery.

  Currency holdings rose about US$194 billion, more than economists forecast, in the third quarter, the central bank said. That compared with a US$7.2 billion gain in the previous three months, which was the smallest increase in 11 years.

  In Washington, US Secretary of the Treasury Timothy Geithner said on Tuesday that there is “no risk” of a global currency war erupting, despite recent currency interventions by nations ranging from Japan to Colombia.

  Geithner acknowledged in an interview on The Charlie Rose Show broadcast on Bloomberg TV that Brazil has made reference to the possibility, but he brushed aside fears.

  “They used that phrase,” Geithner said. However “there is no risk of that.”

  Geithner’s comments came despite a failure over the weekend by the world’s top finance officials meeting in Washington to reach a consensus on measures that could head off a potential currency battle.
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