China’s trade surplus grew last month as both exports and imports rose on-year, the government said yesterday, adding to pressure on Beijing ahead of the G20 summit to let its currency appreciate.
The trade surplus expanded to US$27.15 billion, customs authorities said, before a G20 summit in Seoul that is expected to focus on rebalancing the skewed global economy.
China’s exports increased 22.9 percent last month from a year earlier, totaling US$135.98 billion, while imports rose 25.3 percent to US$108.83 billion, according to the data.
The figures — along with US data expected to show a trade deficit of about US$45 billion later yesterday — were likely to fuel debate over trade imbalances, said Brian Jackson, a senior strategist at Royal Bank of Canada.
“The disparity in global trade balances is the key point that will likely attract attention as senior officials fly in to Seoul for the G20 meeting,” Jackson told reporters. “This stark contrast will likely add to the international pressure for China to move faster on the currency to provide more support to the global economy.”
Critics claim the yuan is undervalued by as much as 40 percent, giving Chinese exporters an unfair trade advantage by making their goods artificially cheap.
China set the yuan’s central parity rate — the middle of the currency’s allowed trading band — at 6.6450 to the US dollar yesterday, the strongest rate since currency reforms began in 2005.
“Imports were lower than market expectations ... which showed that domestic demand may not be as strong as imagined,” Jason Xu (許小年), a Beijing-based economist with China International Capital Corp (中國國際金融公司), told reporters.
Beijing might respond by allowing the yuan to strengthen at a slightly faster pace against the dollar in the short term, Xu said.
China’s top central banker Zhou Xiaochuan (周小川) has said he rejects any form of “shock therapy” to revaluate the yuan, saying the yuan would move gradually toward an “equilibrium” level.
If the trade surplus stays at current levels, pressure to strengthen the yuan will only increase, said Wang Hui (汪輝), an analyst at Haitong Securities (海通證券) in Shanghai.
“If the trend continues, this year’s total trade surplus will exceed the [Chinese] Ministry of Commerce’s preliminary [2010] target of US$100 billion, leading to new pressures from other countries,” Wang said.
However, the year-on-year export growth figures can be -misleading because of their low levels a year ago, warned Kevin Lai (賴志文), an economist with Daiwa Capital Markets in Hong Kong, adding that exports have been flat since August.
“It looks to me that it was flat again, telling us the rush orders ahead of Christmas have not materialized. So it’s not entirely good news,” Lai said.
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