"China now running monthly trade surpluses larger than any country has ever posted before...."
July 10, 2006
China's Monthly Trade Surplus Hits New Record
By DAVID BARBOZA
nytimes.com
SHANGHAI, July 10 — China is now running monthly trade surpluses larger than any country has ever posted before, economists say, raising the prospect of more tensions with the United States and Europe over the imbalances and over exchange rates that contribute to them.
The Chinese government said today that its exports in June were worth $14.5 billion more than its imports, breaking a record set just last month. Exports soared 23 percent in June to $81.3 billion, while imports rose 19 percent to $66.8 billion, the government said.
Economists say the huge surplus is likely to increase the international pressure on the Chinese government to allow its currency, known as the yuan or renminbi, to appreciate against the dollar and other currencies, making its exports more expensive for foreigners and its imports cheaper for Chinese buyers, as a way of narrowing the trade gap.
Some analysts are also warning that China’s growing trade surpluses are creating significant imbalances in the global economy, with too much foreign exchange piling up in China and too much of the world’s debt burden landing on the United States.
Many leading economists agree that if something is not done to address the trade imbalances, the global economy could be thrust into recession.
“This is a significant number,” Dong Tao, a Credit Suisse economist who specializes in Asia outside of Japan, said of the latest monthly figure. “We’re expecting a trade surplus in China of $130 billion this year, and a current account surplus of $200 billion. This is unprecedented.”
The Chinese government has already taken some steps. Under pressure, it allowed a modest revaluation, about 2 percent, of the yuan against the dollar, and it has promised to gradually allow more increases, though they have come very slowly.
Beijing is also encouraging consumers to spend more at home, in the hope that faster growth in the domestic economy will pull in more imported goods.
But even as imports and consumer spending have picked up in China over the past year, exports continue to climb at remarkable rates, even after years of heady, double-digit gains.
Already this year, China’s surplus with the rest of the world has risen to about $61.5 billion, up 55 percent from a year ago, and easily on pace to surpass last year’s $102 billion total.
“This is sure to increase the trade war between the U.S., Europe and China,” says Chen Jianan, a professor of economics at Fudan University in Shanghai.
But China has other problems on its hands. The government has been trying to cool down a sizzling overall economy in which output grew by about 10 percent in the first half of this year, according to government officials and statistics. Indeed, China seems to be firing on all cylinders, opening new factories, building new roads, housing developments, malls and even entirely new cities ahead of 2008, when Beijing will host the summer Olympics.
China now has the world’s fourth largest economy, after the United States, Japan and Germany; it supplanted Great Britian last year. China overtook Japan earlier this year as the holder of the world’s largest foreign currency reserves, which now stand at about $875 billion; some analysts expect that figure to reach $1 trillion by the end of this year.
In recent months, the government has raised interest rates, announced new measures to rein in the hot real estate market, and cracked down on bank lending, all in the hope of heading off inflation.Still, Stephen Green, an economist at Standered Chartered Bank, said he doesn’t expect any major move on exchange rates by the Chinese government soon.
Hong Liang, an economist at Goldman Sachs, said in a report issued today that the huge trade surplus once again suggests that the Chinese currency is undervalued.
But Dong Tao at Credit Suisse said that a revaluation may be meaningless, because the real problem is that American consumers are eager to buy low-cost Chinese manufactured goods, but the United States does not make much that China wants to import.
“The U.S. has little to sell back to China but Boeing and beef,” Mr. Tao says. “And this is something China and the U.S. realize.”
Still, he said, “a $200 billion current-account surplus is something problematic for the rest of the world.”
Copyright 2006 The New York Times Company |
