Despite concern over a weak euro, Chinese exports once again outpaced imports in the month of May, boosting China's trade surplus and giving further ammunition to critics of the country's monetary policy.
REUTERS - China’s exports and its trade surplus jumped in May, putting new pressure on U.S. Treasury Secretary Timothy Geithner to placate congressional critics who say Beijing is keeping the yuan unfairly undervalued.
Imports also grew robustly, testifying to underlying strength in the world’s third-largest economy despite government steps to cool the red-hot property market.
Some economists questioned whether the momentum could be sustained given debt problems in Europe, the country’s biggest overseas market, but several said it would revive the debate about the timing of a long-awaited resumption in the appreciation of the Chinese currency.
“It will support those who argue for a change in the policy, to the extent that it reduces near-term uncertainty about exports,” said Wensheng Peng, an economist at Barclays Capital in Hong Kong.
But Peng said the debate in Beijing was more about introducing greater flexibility in the currency than pushing up its value. As such, any climb would be moderate and gradual.
“Reform will be more about increasing two-way variations in the exchange rate,” he said.
Offshore forward markets seemed to agree. At mid-morning, they were pricing in a rise of just 0.5 percent in the yuan against the dollar in the next year.
China’s exports rose 48.5 percent in May from a year earlier and imports were up 48.3 percent, the General Administration of Customs said on Thursday, giving China a trade surplus of $19.53 billion, up from just $1.7 billion in April.
The median forecast of 32 economists polled by Reuters was for exports to rise 32 percent and imports to climb 45 percent, with a projected trade surplus of $8.8 billion.
Sources told Reuters on Wednesday that export growth was up about 50 percent from a year ago, giving a boost to global financial markets as investors expressed relief that China’s fast growing economy did not appear to be juddering to a sharp halt.
Asian stocks extended gains on Thursday as China’s official data confirmed faster trade growth, which investors hope will ease fears about a slowdown in Europe.
Forget a double dip
“The export figures were much stronger than the market had expected and can ease fears about an economic double-dip,” said Xie Xuecheng, senior economist with Southwest Securities in Beijing.
“However, we should not be overly optimistic about the export sector in the coming months because the crisis in Europe has not ended and cost pressures on exporters remain high,” he added.
Wages are surging in the export heartlands of southern China, dramatised by a wave of strikes to press for higher pay and contract electronics manufacturer Foxconn’s offer to almost double the wages of some workers after a string of suicides.
Figures also showed strong upward pressure on property prices, which rose 12.4 percent in the year to May, just shy of a record 12.8 percent annual increase in April.
Despite double-digit economic growth, Beijing’s repeated crackdowns on property speculation have left Shanghai’s stock market one of the world’s worst performers this year, with losses of more than 20 percent.
Washington on warpath
Some economists suspected that overseas buyers of Chinese goods might have brought forward their purchases in May to beat an expected resumption of the yuan’s rise, something that had been feverishly anticipated in April and early May.
Exports rose 9.9 percent from April. After calendar adjustments for the number of working days, the increase was 10.9 percent, Customs said. By contrast, imports fell month on month.
Looking through the distortions in the data, Ting Lu, an economist with Bank of America Merrill Lynch, said in a report that year-on-year export growth could soon be slumping.
Because Europe’s debt crisis has sent the euro tumbling, speculation has recently cooled that the yuan will resume its rise after Beijing froze it in July 2008 to help exporters weather the global credit crunch.
The yuan is tied to the dollar and that has led to a sharp rise in its all-important trade-weighted index. But it has done nothing to appease lawmakers in Washington who blame what they see as a cheap yuan for the loss of millions of U.S. jobs.
U.S. Senator Charles Schumer said on Wednesday that he and other colleagues would push for a vote in the next two weeks on legislation that would allow the Commerce Department to use anti-dumping and countervailing duty laws against China or any other country with a fundamentally misaligned exchange rate.
“Years of meetings and discussions with Chinese officials in an effort to persuade China to float its currency have repeatedly failed to produce lasting and meaningful results,” the New York Democrat said.
Treasury Secretary Timothy Geithner delayed an April 15 report on whether China was manipulating its currency to give Beijing more time to act on its own. He has argued it is in China’s own interest to reform.
Geithner, who was in Beijing two weeks ago for high-level talks, is expected to face a grilling when he goes before the Senate Finance Committee on Thursday.
“With U.S. unemployment still close to 10 percent and Chinese exports now growing at a rate of almost 50 percent, it is likely that the rhetoric on this issue coming out of Washington will soon get more heated,” said Brian Jackson, a strategist with Royal Bank of Canada in Hong Kong.
Date created : 2010-06-10