China Trade Surplus Tops Estimates, Adding to Tension
China’s Trade Surplus Exceeds Estimates
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Workers sew shirts in Shenzhen, Guangdong province, China.
Workers sew shirts in Shenzhen, Guangdong province, China. Photographer: Forbes Conrad/Bloomberg
Dec. 10 (Bloomberg) -- Shaun Rein, managing director of China Market Research Group, talks about the outlook for Chinese stocks listed in the U.S. during 2010. He speaks from Shanghai with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
Wang Qishan, China's vice premier
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Wang Qishan, China's vice premier, speaks at a dinner on Chinese-American relations in Washington, D.C., last year.
Wang Qishan, China's vice premier, speaks at a dinner on Chinese-American relations in Washington, D.C., last year. Photographer: Jay Mallin/Bloomberg
China’s trade surplus and lending exceeded forecasts in November, underscoring the case for higher interest rates and a stronger exchange rate to stem the nation’s escalating inflation.
Exports rose 35 percent to a record $153.3 billion from November 2009 and imports advanced 38 percent to an unprecedented $130.4 billion, leaving a $22.9 billion excess, the customs bureau said on its website. Loans were 564 billion yuan ($85 billion).
Today’s trade report indicates a sustained rebound in demand among Chinese consumers and overseas customers, buttressing the argument for Premier Wen Jiabao’s government to remove stimulus measures adopted during the global crisis. Failure to allow faster gains in the yuan risks pushing U.S. lawmakers into passing protectionist legislation.
“There is no excuse for China not to allow the renminbi to appreciate faster, as its international trade has fully recovered and exceeded pre-crisis levels,” said Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd. who previously worked at the Hong Kong Monetary Authority and World Bank. “A rate hike is almost certain over the weekend.”
The median estimate of 30 economists surveyed by Bloomberg News was for a $21.2 billion trade surplus.
New Loans
November’s new lending left this year’s total about 50 billion short of the government’s target maximum of 7.5 trillion yuan, according to Bloomberg data. Analysts’ median estimate was for 500 billion yuan of loans last month. M2, a measure of money supply, increased 19.5 percent, the central bank said.
Twelve-month non-deliverable yuan forwards strengthened, trading at 6.5113 as of 3:21 p.m. in Hong Kong. The Shanghai Composite Index of stocks closed 1.1 percent higher, before the release of the lending numbers.
The surplus was the nation’s fifth this year in excess of $20 billion and compared with October’s $27.2 billion, channeling cash into an economy already beset by quickening inflation. The government will tomorrow release a report likely to show gains in consumer prices accelerating for a fifth month.
The consumer price index might have jumped 5.1 percent in November from a year before, the most since July 2008 and above economists’ median estimate of 4.7 percent, reports from Citigroup Inc. and the Economic Information Daily indicated today. Property prices also continue to increase, with a 0.3 percent advance in November from October, a report showed today.
‘Not Good News’
Communist Party leaders are meeting in Beijing to set guidelines for the 2011 economy after the Politburo indicated Dec. 3 that officials will tighten monetary policy. Citigroup analysts said reserve requirements for banks may rise, along with interest rates, by month-end.
“Exceedingly strong exports growth amid an already overheated domestic economy is not good news as it adds to the overheating pressures which will require the government to take even more stringent measures to bring down inflation,” Goldman Sachs Group Inc. analysts Song Yu and Helen Qiao said in a note.
China’s surplus with the U.S. was about $16.7 billion, equivalent to about three quarters of the total. The U.S. Commerce Department may separately report today a $43.8 billion trade gap for October, the seventh straight monthly total surpassing $40 billion, a Bloomberg survey shows.
Unexpectedly strong sales in the U.S. Thanksgiving holiday season for goods such as electronics, may have encouraged retailers to stock up, according to Tomo Kinoshita, deputy head of Asia economics research at Nomura Holdings Inc. in Hong Kong.
‘Sellout’ Christmas
Hong Kong-based Li & Fung Ltd., the biggest supplier to Wal-Mart Stores Inc., told Bloomberg Television today that retailers will have a “sellout” Christmas and Chinese factories are “overbooked.”
Today’s figures may exacerbate trade tensions after Senate Foreign Relations Committee Chairman John Kerry said this week that Congress is growing impatient with China holding down the yuan and may impose legislation “with teeth” next year.
The Chinese currency gained 0.1 percent in November and 0.3 percent in October, less than the 1.7 percent pace in September that U.S. Treasury Secretary Timothy F. Geithner signaled was appropriate.
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, said Dec. 7 that Geithner has probably told China that “you’ve got to do at least 1 percent a month” in currency gains against the dollar.
In contrast, Yangzijiang Shipbuilding Holdings Ltd., China’s third-largest shipyard outside state control, is basing currency-hedging on the yuan rising 3 percent a year, the company said in October.
Hu Visit
A group of Republican and Democratic senators told the Chinese leader in a letter this week that the yuan should be allowed to appreciate “meaningfully” before President Hu Jintao visits the U.S. in January. Ahead of that, Chinese Vice Premier Wang Qishan is co-chairing annual U.S.-China meetings on commerce in Washington Dec. 14-15.
The senators also said that the Senate could follow the House of Representatives in passing legislation targeting trading partners with undervalued currencies. A stronger yuan could help to narrow trade imbalances by making Chinese products more expensive overseas.
“China’s rising trade surplus is yet another sign of a resurgence of global trade imbalances,” said Eswar Prasad, a senior fellow at the Brookings Institution and a professor at Cornell University. “It is becoming increasingly clear that China has made little progress on rebalancing its economy and reducing its dependence on exports.”
--Chinmei Sung, Rebecca Christie, Li Yanping with assistance from Jay Wang in Singapore and Wing-Gar Cheng in Hong Kong. Editors: Paul Panckhurst, Chris Anstey
To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net.
To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net
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