A Record Trade Surplus (But)

Related entries: Economy, General, News, Trading

China recorded an unsurprising record trade surplus of over US$260 billion for 2007 – well ahead of projections made by the National Reform & Development Commission from a year ago, when it was estimated to be US$210 billion. AFP reports that:

    ”China’s trade surplus surged nearly 50 percent last year to surpass 260 billion dollars, official data showed Friday, a stunning rise certain to see more global pressure for Chinese currency reform.

    A surplus of 22.69 billion dollars in December lifted the 12-month figure to 262.2 billion dollars, up 47.7 percent from 2006, the customs administration said.

    The surplus has climbed more than 10-fold since 2003, stoking concerns among China’s major trading partners about the Asian nation’s export juggernaut.

    …US, European and other critics complain that China keeps its currency, the yuan, artificially weak, which they argue gives Chinese exporters an unfair advantage.

    China has responded by allowing the yuan to appreciate gradually, and slightly faster in recent weeks, but it has refused to scrap its controls completely.

    The data showed exports rose 25.7 percent year-on-year to hit 1.218 trillion dollars in 2007, providing more fuel for critics who say the yuan is still too weak.

    Meanwhile, imports climbed by 20.8 percent to reach 955.8 billion dollars.

    On Friday, the yuan hit another record high of 7.2672 yuan to the dollar, which marked an appreciation of about 12 percent since the currency’s peg to the greenback was loosened in July 2005.

    The yuan is likely to appreciate by around eight to 10 percent against the dollar in 2008, according to Qiu Qingdong, a Beijing-based economist with Guodu Securities, whose estimate was similar to those given by other analysts.

    …The Europeans may have an even greater cause for complaint, as the yuan has actually weakened against the euro since July 2005, according to Qiu.

However, all is not lost. Bloomberg repots that:

    “China’s trade surplus narrowed in December and money-supply growth dwindled, signaling that the fastest economic expansion in 13 years may have peaked.

    The trade surplus shrank to $22.7 billion from $26.2 billion in November, the Chinese customs bureau said in Beijing today. M2, the broadest measure of money supply, rose 16.7 percent to 40.3 trillion yuan ($5.55 trillion) from a year earlier, the smallest increase in seven months, the central bank said.

    Exports grew at the slowest pace in two years, indicating that recent yuan gains, the cooling global expansion and cuts to export-tax incentives on polluting industries are beginning to bite. The central bank is still likely to take more measures to limit credit, ease inflation from an 11-year high and prevent the economy from overheating just as the U.S. expansion is faltering.

    …China’s economy, the world’s fourth largest, expanded 11.5 percent in 2007, according to government forecasts. Wang estimates it will grow between 8 percent and 10 percent over the next three to five years.

    …Exports rose 21.7 percent in December to $114.4 billion, compared with last month’s 22.8 percent and the slowest since December 2005 excluding distortions from Lunar New Year holidays in January and February.

    The yuan advanced 7 percent against the dollar in 2007, twice as fast as in 2006, partly because the central bank boosted interest rates to a nine-year high.

    …China’s foreign-exchange reserves, the world’s biggest, rose 43 percent to a record $1.53 trillion at the end of 2007 from a year earlier, today’s central bank statistics showed.

The trade figures will continue to be a focus of media and political pundits as we get into the swing of 2008. It will be interesting to see given the complexity of the issues how the balance of RMB valuation and exports develops. But there is no doubt that the politics will be hard to separate from the economics.

See news sources:

One Response to “A Record Trade Surplus (But)”

  1. forex » Blog Archive » A Record Trade Surplus (But) Says:

    […] rm. A surplus of 22.69 billion dollars in December lifte Read the rest of this great post here

    Post […]

Leave a Reply

You must be logged in to post a comment.