November 10, 2010China's Trade Surplus Jumps Ahead of G-20 Summit
China posted a larger-than-forecast $27.1 billion October trade surplus, a day before Group of 20 leaders including Presidents Barack Obama and Hu Jintao meet in Seoul to tackle global imbalances in spending and capital flows.
Exports rose 22.9 percent from a year earlier and imports climbed 25.3 percent, the customs bureau said on its website today. The state-run Xinhua news agency reported the trade surplus, which compares with the $25 billion median estimate of 27 economists surveyed by Bloomberg News. In September, the excess was $16.9 billion.
China’s persistent surplus and curbs on its currency fuel tension with trading partners and pump cash into the fastest- growing major economy, complicating monetary policy as inflation accelerates. Obama said yesterday in Jakarta that G-20 leaders will “extensively” discuss trade gaps and currency restrictions hindering global growth.
“The rebalancing of China’s economy has an awfully long way to go -- in fact it’s hardly even got started,” Mark Williams, an economist at Capital Economics Ltd. in London, who worked at the U.K. Treasury as an adviser on China from 2005 to 2007. “In normal circumstances, the world might be willing to wait, but not when the likes of the U.S. are struggling with very high unemployment,” he said ahead of today’s release.
The increase in exports compared with a median estimate of a 23 percent gain and a 25.1 percent jump in September. Import growth was less than a median forecast for a 28.3 percent advance following a 24.1 percent climb in September.
Yuan’s Gain
In the lead-up to the G-20 summit, China yesterday allowed the biggest gain in the yuan against the dollar since scrapping a currency peg in July 2005, an 0.5 percent increase to 6.6440 per dollar. The Chinese currency is up about 2.7 percent this year compared with gains of more than 12 percent for Thailand’s baht and more than 10 percent for Malaysia’s ringgit.
China’s surplus compares with economists’ median forecast for a $45 billion U.S. trade deficit in September, data to be released today.
“This large contrast will likely add to U.S. and global pressure on China during the upcoming G-20 meetings and beyond to play a more active role in reducing global trade imbalances, particularly on the currency front,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong. He commented before the release of today’s data.
‘Serious’ Risk
A failure by China, the No. 1 exporter, to alter its growth model to become less dependent on industry, investment and exports would be a “serious” medium-term risk to the domestic and global economies, the World Bank said last week.
China’s central bank sells bills and raises’ banks’ reserve requirements to drain cash from the economy, seeking to contain price pressures. Policy makers have also imposed a 7.5 trillion yuan ($1.1 trillion) lending quota for the year and last month raised interest rates for the first time since 2007. In addition, the currency regulator said yesterday that it would tighten controls on inflows of speculative capital.
Inflation accelerated to a 4 percent annual pace in October, the fastest in two years, according to the median forecast in a Bloomberg News survey of analysts. That number is due tomorrow. Property prices rose 8.6 percent from a year earlier, the smallest gain in 10 months, as the government cracks down on speculation to limit asset-bubble risks, statistics bureau data showed today.
Inflation Pressure
Zhang Ping, the head of the nation’s top planning agency, said yesterday that full-year growth in consumer prices may be “slightly” above the government’s 3 percent target. The trend this quarter is worse than the government expected, Zhang said, citing “imported inflation” as excessive global liquidity and a weaker dollar push up commodity costs.
G-20 members including Brazil, China and Germany criticized the latest round of monetary easing by the U.S. Federal Reserve, with some officials seeing a threat that capital flows will fuel inflation and asset bubbles in emerging markets.
China’s economic data for October is likely to strengthen the case for “further policy normalization,” adding pressure for more interest-rate increases and gains by the yuan, according to Jackson, the economist.
The U.S. is seeking to press China for faster currency gains without triggering a descent into a trade war. Companies including Caterpillar Inc., the largest maker of construction and mining equipment, have warned American lawmakers that legislation aimed at forcing China to move could lead to retaliation.
Chinese central bank Governor Zhou Xiaochuan has said his nation needs to avoid the “shock therapy” of excessive yuan appreciation and “very fast” gains probably wouldn’t end global economic imbalances. Appreciation of 20 percent to 40 percent would exacerbate Chinese unemployment and cause social upheaval, according to Premier Wen Jiabao.
“If the yuan rises to 6 to the dollar, we’re doomed,” Simon Pan, general manager of Zhejiang Huangyan Hongfan Toys Factory, said last month at China’s biggest trade fair.
http://www.bloomberg.com/news/2010-11-10/china-trade-surplus-swells-more-than-forecast-to-27-billion-on-g-20-eve.html
China posted a larger-than-forecast $27.1 billion October trade surplus, a day before Group of 20 leaders including Presidents Barack Obama and Hu Jintao meet in Seoul to tackle global imbalances in spending and capital flows.
Exports rose 22.9 percent from a year earlier and imports climbed 25.3 percent, the customs bureau said on its website today. The state-run Xinhua news agency reported the trade surplus, which compares with the $25 billion median estimate of 27 economists surveyed by Bloomberg News. In September, the excess was $16.9 billion.
China’s persistent surplus and curbs on its currency fuel tension with trading partners and pump cash into the fastest- growing major economy, complicating monetary policy as inflation accelerates. Obama said yesterday in Jakarta that G-20 leaders will “extensively” discuss trade gaps and currency restrictions hindering global growth.
“The rebalancing of China’s economy has an awfully long way to go -- in fact it’s hardly even got started,” Mark Williams, an economist at Capital Economics Ltd. in London, who worked at the U.K. Treasury as an adviser on China from 2005 to 2007. “In normal circumstances, the world might be willing to wait, but not when the likes of the U.S. are struggling with very high unemployment,” he said ahead of today’s release.
The increase in exports compared with a median estimate of a 23 percent gain and a 25.1 percent jump in September. Import growth was less than a median forecast for a 28.3 percent advance following a 24.1 percent climb in September.
Yuan’s Gain
In the lead-up to the G-20 summit, China yesterday allowed the biggest gain in the yuan against the dollar since scrapping a currency peg in July 2005, an 0.5 percent increase to 6.6440 per dollar. The Chinese currency is up about 2.7 percent this year compared with gains of more than 12 percent for Thailand’s baht and more than 10 percent for Malaysia’s ringgit.
China’s surplus compares with economists’ median forecast for a $45 billion U.S. trade deficit in September, data to be released today.
“This large contrast will likely add to U.S. and global pressure on China during the upcoming G-20 meetings and beyond to play a more active role in reducing global trade imbalances, particularly on the currency front,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong. He commented before the release of today’s data.
‘Serious’ Risk
A failure by China, the No. 1 exporter, to alter its growth model to become less dependent on industry, investment and exports would be a “serious” medium-term risk to the domestic and global economies, the World Bank said last week.
China’s central bank sells bills and raises’ banks’ reserve requirements to drain cash from the economy, seeking to contain price pressures. Policy makers have also imposed a 7.5 trillion yuan ($1.1 trillion) lending quota for the year and last month raised interest rates for the first time since 2007. In addition, the currency regulator said yesterday that it would tighten controls on inflows of speculative capital.
Inflation accelerated to a 4 percent annual pace in October, the fastest in two years, according to the median forecast in a Bloomberg News survey of analysts. That number is due tomorrow. Property prices rose 8.6 percent from a year earlier, the smallest gain in 10 months, as the government cracks down on speculation to limit asset-bubble risks, statistics bureau data showed today.
Inflation Pressure
Zhang Ping, the head of the nation’s top planning agency, said yesterday that full-year growth in consumer prices may be “slightly” above the government’s 3 percent target. The trend this quarter is worse than the government expected, Zhang said, citing “imported inflation” as excessive global liquidity and a weaker dollar push up commodity costs.
G-20 members including Brazil, China and Germany criticized the latest round of monetary easing by the U.S. Federal Reserve, with some officials seeing a threat that capital flows will fuel inflation and asset bubbles in emerging markets.
China’s economic data for October is likely to strengthen the case for “further policy normalization,” adding pressure for more interest-rate increases and gains by the yuan, according to Jackson, the economist.
The U.S. is seeking to press China for faster currency gains without triggering a descent into a trade war. Companies including Caterpillar Inc., the largest maker of construction and mining equipment, have warned American lawmakers that legislation aimed at forcing China to move could lead to retaliation.
Chinese central bank Governor Zhou Xiaochuan has said his nation needs to avoid the “shock therapy” of excessive yuan appreciation and “very fast” gains probably wouldn’t end global economic imbalances. Appreciation of 20 percent to 40 percent would exacerbate Chinese unemployment and cause social upheaval, according to Premier Wen Jiabao.
“If the yuan rises to 6 to the dollar, we’re doomed,” Simon Pan, general manager of Zhejiang Huangyan Hongfan Toys Factory, said last month at China’s biggest trade fair.
http://www.bloomberg.com/news/2010-11-10/china-trade-surplus-swells-more-than-forecast-to-27-billion-on-g-20-eve.html
