China posts second biggest trade surplus
For the first nine months, China’s trade surplus reached $110bn, exceeding last year’s total. Premier Wen Jiabao calls the soaring surplus one of China’s biggest economic “problems” as its strained trade ties with the US and flooded the world’s fo...
By Agencies |
TOKYO: China had its second-largest ever trade surplus in September, signaling the government may struggle to cool an investment boom. The gap narrowed less than expected to $15.3bn from a record $18.8bn in August, the Beijing-based customs bureau said on Thursday on its website.
For the first nine months, China’s trade surplus reached $110bn, exceeding last year’s total. Premier Wen Jiabao calls the soaring surplus one of China’s biggest economic “problems” as its strained trade ties with the US and flooded the world’s fourth-biggest economy with cash, complicating his efforts to slow investment.
The gap, which China aims to close by ’10, is adding pressure on the nation to let its currency gain faster to stem money inflows.
“It’s one more argument to allow a stepped up pace of appreciation for the yuan,” said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. The yuan was little changed at 7.9148 against the dollar on Thursday. Mr Cohen forecast the currency will strengthen to 7.8 to the dollar by year-end.
China, after dropping a peg to the dollar in July ’05, has limited yuan gains against the dollar to a total of 2.4% since then. US lawmakers including Senators Charles Schumer and Lindsey Graham have lambasted China for not allowing the yuan to climb faster, and have threatened sanctions.
ADVERTISEMENT
The EU last week imposed duties on E9.7bn of Chinese and Vietnamese footwear. China supplied half of the 2.5bn shoes sold in Europe last year. China had a $14.1bn surplus with the US last month, and sold $8.8bn more of goods to the EU than it bought from the bloc. By exporting more than it imports, China has helped underpin an investment boom at home that threatens to leave the nation with idle production lines. The central bank has raised interest rates, forced banks to set aside more money as reserves.
“The surplus puts pressure on China to sterilise,” said Jun Ma, an economist at Deutsche Bank in Hong Kong. “The central bank will likely use a combination of instruments, including the currency” to narrow the surplus.
The gap has caused foreign exchange reserves to skyrocket to almost $1 trillion, the highest of any nation. China’s foreign exchange regulator on October 6 said imbalances in international payments balances makes China more vulnerable to external shocks and acknowledged the need to deepen foreign exchange reform and seek other ways to stem the surplus.
ADVERTISEMENT
China’s exports rose 30.6% last month from a year earlier to a record $91.6bn after jumping 32.8% in August, while imports increased 22% after gaining 24.6%, Thursday’s statement said. Soaring exports from China, South Korea and Taiwan suggests the world economy is weathering a US housing slowdown and higher interest rates, Cohen of Action Economics said. All three economies had record overseas sales last month.
ADVERTISEMENT
At the same time, countries are responding to the perceived threat of lopsided trade flows to global financial stability. A swelling US current account deficit, mirrored by a widening surplus in China, may trigger a dollar slump and “play havoc” with the world economy, Asian Development Bank chief economist Ifzal Ali said October 3.China’s government aims to balance the value of imports and exports by ’10 by curbing growth in overseas sales of textiles, metals and other processed goods, the commerce ministry said yesterday. Faster currency appreciation will also be necessary to help stem the surplus and stop foreign exchange reserves from piling up, some economists said.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
