China's Trade Surplus Widens to $24.9 bn In August

Sep 11, 2007 - China's trade surplus rose 33.0% to US$24.9 billion in August from last year, marking the second highest monthly increase, official data indicated Tuesday.

The monthly trade surplus registered its record high of US$26.9 billion in June and fell slightly to US$24.4 billion in July.

For the first eight months, China's total trade surplus grossed US$161.8 billion, the report said. At the current rate, the surplus is set to cross US$250 billion in 2007, breaching the record high ofUS$177.47 billion posted last year, analysts say.

Exports rose 22.7% to US$111.3 billion in August from last year, while imports advanced 20.1% to US$86.4 billion, the report said.

Europe was China's biggest trading partner, with exports to Europe rising 31.3% to US$23 billion, while imports were up 21.8% at US$10.2 billion.

The strong export growth continued amid growing criticism particularly from the US that China's undervalued yuan gives the country an unfair trade advantage over its trade partners.

China had a trade surplus of US$15 billion with the United States, its second-biggest trading partner. Exports to the United States rose 16.7% to US$20.9 billion, while imports from the US were up 15.5% at US$5.9 billion. China's total trade surplus with the United States stood at US$103.3 billion for the first eight months.

The U.S. Senate is reportedly considering measures to penalize China for its currency controls. The measures have moved ahead despite protests by U.S. Treasury Secretary Henry Paulson, who is conducting a long-range strategic economic dialogue with Beijing over trade and related disputes.

Meanwhile, China has initiated several measures in recent months, to curtail the overrun export momentum and ease frictions with China's trade partners. Companies have been encouraged to curb exports of products that consume vast amounts of energy and cause serious pollution and expand imports of high-tech goods. Government imposed additional export tariffs for exports and lowered import duties from June this year in a move to limit the widening trade gap.

China's trade surplus expanded to US$112.5 billion, in the first half year, up US$51.1 billion from last year, as exports grew 27.6% to US$546.7 billion, and imports advanced 18.2% to US$434.2 billion. The overall external trade showed an increase of 23.3% over a year ago.

The central bank said in its second quarter monetary policy report released on September 6, that the low resource prices and labor costs are among the major factors that boosted trade surplus.

The report said that trade surplus would remain at a relatively high level going forward. The bank noted that the growth of the world economy is likely to be above 4.0% for the fifth consecutive year, making this expansionary cycle the longest in the past 30 years, triggering strong external demands.

Meanwhile, restrictions on exports of high-tech equipment to China by trading partners will continue to limit China's efforts to expand imports, the report added.

The booming external trade helped the economy expand 11.9% in the second quarter and 11.5% in the first half year, bringing excess liquidity in the financial system that put further inflationary pressure.

Consumer inflation in China soared to its highest level in nearly 11 years in August as food prices continue to surge, the National Bureau of Statistics said Tuesday. The annual Consumer Price Index -CPI, rose 6.5% in August after climbing 5.6% in the previous month. The result exceeded 6.0% growth expected for August.

The increasing inflationary concerns intensified expectations of further rate hikes although the central bank raised the key interest rates four times this year.

Last month, the People's Bank of China raised the benchmark one-year interest rate to a nine-year high of 7.02%. The central bank also announced its decision last week to raise the reserve requirement ratio for commercial banks by 0.5 percentage point to 12.5% effective from September 25, in a bid to control excessive bank lending.