China tells of surplus smaller than forecast

Chinese exports rose 38 per cent from a year earlier while imports climbed 51 per cent. Photo / Thinkstock

China reported a smaller-than-forecast trade surplus of about US$6.5 billion ($8.56 billion) last month as import growth outpaced export gains for a fourth month.

The gap, the smallest in nine months, compared with the US$11.3 billion median estimate in a Bloomberg survey of economists and a US$13 billion excess in December.

Exports rose 38 per cent from a year earlier while imports climbed 51 per cent, the customs bureau said yesterday. January data is distorted by the timing of Chinese New Year.

A smaller surplus may not ease tensions over the value of the nation's currency after China was confirmed yesterday to have overtaken Japan as the world's second-biggest economy.

Finance chiefs from the Group of 20 nations are likely to discuss the yuan's value in Paris this week, United States lawmakers are reintroducing legislation targeting China and Brazil may discuss its concerns with President Barack Obama next month.

China "will return to large monthly trade surpluses in the coming months", said Liu Li-gang, an economist at Australia & New Zealand Banking Group in Hong Kong, adding that January's pace of import growth can't be sustained.

Japan's Government said yesterday that China became the world's No 2 economy last year.

The yuan traded at 6.5948 a dollar as of 1:28 p.m. in Shanghai. The Shanghai Composite Index climbed 2 per cent amid speculation that the Government may today announce a slower-than-forecast inflation rate for January.

Consumer prices may have climbed 4.9 per cent, Central China Securities said, citing speculation. Deutsche Bank AG economist Ma Jun said any such slowdown may only reflect a reweighting of the nation's price index away from food.

The median forecast in a Bloomberg survey of economists was for inflation to jump to a 30-month high of 5.4 per cent.

Trade data from China, the world's biggest exporter, is difficult to interpret in the first two months because of distortions caused by the Lunar New Year holiday. The week-long break started on February 2 this year, almost two weeks earlier than last year.

The value of exports was US$150.7 billion and imports were US$144.3 billion.

"There has been a concentrated rush of imports and exports before the holiday, resulting in rapid growth in January's foreign trade," the customs bureau said.

Rising prices also boosted the value of imports, with the average cost of shipments of iron ore surging 66 per cent from a year earlier, it said.

"A more reliable gauge of China's import momentum and global trade may have to wait until March," said Li Wei, a Shanghai-based economist with Standard Chartered Plc.

The growth in exports was higher than all 22 economists' forecasts in the Bloomberg survey and compared with the median estimate of 23 per cent. The gain in imports, the biggest in 10 months, compared with the 27 per cent median forecast in the survey.

A customs bureau statement put the trade surplus at US$6.45 billion, while a table released by the same organisation said US$6.46 billion.

While the US Treasury refrained this month from labelling China a currency manipulator, the Obama Administration isn't satisfied with the yuan's gains and is seeking to address the "remaining substantial undervaluation", Lael Brainard, the Treasury Department's undersecretary for international affairs, said last week.

That day American lawmakers introduced legislation aimed at pushing China to let its currency strengthen faster. A bill passed by the House of Representatives last year that would allow US companies to petition for duties on imports from China to compensate for the effect of a weak yuan, died when the Senate didn't vote before the end of the year.

Brazil will discuss the threat from cheap Chinese imports when Obama visits next month, a Brazilian official said.

The yuan has gained about 3.5 per cent against the dollar since June, when the central bank scrapped a peg to the US currency, in place during the global financial crisis.

The Chinese currency's real rate against the dollar is rising at an annual rate of 10 to 12 per cent, boosted by accelerating inflation in China, Fred Bergsten, director of the Peterson Institute for International Economics, said.

The currency will appreciate to 6.29 a dollar by the end of the year, according to the median forecast in the Bloomberg survey.

Federal Reserve Chairman Ben Bernanke told lawmakers that allowing the yuan to strengthen would be a better way of helping China's policy-makers control inflation than raising interest rates to curb demand.

China raised borrowing costs and savings rates last week for the third time since mid-October ahead of a Government report today forecast to show consumer prices jumped 5.4 per cent in January, the most in 30 months.

TRADING PLACE

* China's exports up 38 per cent in January compared to the same month last year.
* Imports up by 51 per cent over the same period.

- BLOOMBERG