China’s trade surplus up in October
Beijing (AsiaNews/Agencies) – China's trade surplus jumped by US$ 27.1 billion in October, compared to US$ 16.9 billion in September. Overall, exports rose by 22.9 per cent last month, reaching US$ 135.9 billion; imports increased by 25.3 per cent, to US8.8 billion.
This is a sign that China has shrugged off the effects of the global financial crisis, according to Gao Shanwen, chief economist at Essence Securities in Beijing. However, “Import growth in October was weaker than expected, producing the big trade surplus,” owing to weak “domestic demand in the second half” of the year, he said. “In the next two months, import growth will trend up while export growth will slow.” Nevertheless, “The trade surplus will remain high, bringing pressure on yuan appreciation,” he explained.
Whilst a growing China is a good sign for the world economy, by coming on the eve of the G20 summit in Seoul, South Korea, these figures will boost calls for the revaluation of the yuan. Many believe the Chinese currency is undervalued (some say by 40 per cent) to favour Chinese exports. Beijing has steadfastly refused to do, claiming it would stoke inflation (estimated at 4 per cent in October, higher than the 3 per cent set by the government) and compromise plans to reduce high unemployment (running in the tens of millions) caused by the recent global crisis.
For its part, China is blaming Washington for creating excessive global liquidity, weakening the dollar, pushing up prices, thus forcing the mainland to import inflation.
No one would benefit from this. In fact, a rapid rise in the yuan would increase Chinese unemployment levels. Western nations would then be faced with millions of Chinese workers knocking at their doors seeking jobs, Li Ruogu, chairman of the Import-Export Bank of China, recently said.
However, other countries have to cope with high unemployment as well, starting with the United States and many European countries. Their strategy is to stimulate investments and domestic production.
In Seoul, the United States will lead the pack demanding a higher yuan, especially if its trade deficit with China continues to grow.
US President Barack Obama said yesterday during his visit to Indonesia that G20 leaders will “extensively” discuss trade gaps and currency restrictions hindering global growth.
Back home, many in Congress are demanding import dues on Chinese products if the yuan is not allowed to find its real value.
in China, financial authorities have ordered some lenders, including the Bank of Communications Co, to increase their reserve ratios by 50 basis points to remove liquidity to contain inflation.
Above all, the alarming fact is China’s growth of imports, which rose below analysts’ median forecast of 28.3 per cent. This is a sign of low growth in domestic consumption.
In light of the situation, the government has tried to boost the domestic sector, cognizant that this way China’s economy would be less dependent on exports, hitherto favoured by cheap labour and an undervalued yuan.
This year, the latter is up by about 2.9 per cent compared with gains of more than 12 per cent for Thailand’s baht and more than 10 per cent for Malaysia’s ringgit, this despite the fact that the economies of these two countries grew less than China’s.
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12/01/2006
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