China trade surplus hits 4 mth high on stronger exports | business | Hindustan Times
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China trade surplus hits 4 mth high on stronger exports

China posted its biggest trade surplus in four months in April, swinging from a trade deficit in the first quarter, as exports hit a record on stronger global demand despite initial signs of a pinch from Japan's earthquake and nuclear crisis.

business Updated: May 10, 2011 12:08 IST

China posted its biggest trade surplus in four months in April, swinging from a trade deficit in the first quarter, as exports hit a record on stronger global demand despite initial signs of a pinch from Japan's earthquake and nuclear crisis.

The surplus of $11.4 billion, nearly four times greater than expected, could reignite fresh foreign criticism of Beijing's currency policy as senior Chinese and US officials sought to resolve disputes over trade and other policy differences.

Exports grew a stronger than anticipated 29.9% in April from a year earlier to $155.7 billion while imports climbed at a lacklustre 21.8% - a reflection of sustained policy tightening and domestic firms' efforts to hedge higher global commodity prices.

"Exports are much stronger, that's the basic thing... Global demand is still pretty strong, a bit stronger than many people feared," said Tao Wang, economist with UBS in Beijing.

"On the import side, we think that commodity exports had been very strong up until February and there has been quite a bit of inventory build-up. So right now we think it's going through some adjustment."

Hu Yuexiao, economist with Shanghai Securities, expected China's import growth to ease further in May due to falling global commodity prices, pushing up the trade surplus.

China's imports from Japan were $16.0 billion in April, which was 14.9% lower than the $18.8 billion in March, as production and shipments were interrupted by the earthquake and tsunami. Exports to Japan also shrank to $12.1 billion in April, or 7.7% less than in March.

The median forecast of economists polled by Reuters last week was for exports to rise 29.4% and imports to grow 28%, resulting in a trade surplus of $3 billion.

On a seasonally adjusted basis, exports rose 35.1% in April from a year earlier and rose 12.3% from the previous month.

Imports gained 27.4% from a year earlier and rose 7.4% month-on-month, the customs administration said.

China recorded a $1.02 billion trade deficit in the first quarter of the year - the first quarterly trade deficit since 2004, reflecting higher global commodity costs.

Pressures on Yuan
The strong data, including a 16 percent rise in China's trade surplus with the United States to its widest since November, came as senior US and Chinese officials met in Washington to tackle some key disputes.

The data could give fresh ammunition to some US lawmakers who have linked the trade imbalance to China's currency policy, saying a weak yuan gives Chinese manufacturers an unfair advantage in global markets.

US officials criticized China on Monday for its crackdown against dissidents but the world's two largest economic powers agreed on the need to work together to boost global growth at the start of two days of the Strategic and Economic Dialogue.

The meeting covering a range of economic and diplomatic issues are aimed at easing their often tense policy differences.

Some analysts project that higher import bills, along with the government's efforts to rebalance the economy in favour of boosting domestic demand, could cut China's trade surplus for the full-year.

Chinese officials hope a smaller trade surplus with the rest of the world could ease criticism from key trade partners that it has given exporters an unfair boost with a cheap currency.

Still, there are plenty of signs that the government will tolerate faster yuan appreciation this year as it seeks to deal with imported inflation.

China loosened the yuan from a nearly two-year peg to the dollar in June, and this year the People's Bank of China has guided the yuan to record highs. It has now appreciated about 5% since June and 1.5% since the start of this year.

Tapping the brakes on money and lending growth has been a crucial part of Beijing's campaign to rein in inflation, which probably hit a 32-month high of 5.4% in the year to March.

Yuan forwards barely reacted to the data. The Australian dollar rose to $1.0797 from around A$1.0784 just before the Chinese data, and later retreated to $1.0777.

Traders said the lacklustre reaction in the commodity-linked Aussie was owing to the weakness in Chinese imports coupled with worries over how high Chinese inflation still is, data on which is due on Wednesday.