China May Report $21 Billion Trade Gap With Obama Set to Press Hu on Yuan
China May Report $20.8 Billion Trade Gap
Ron Sachs/Pool via Bloomberg
U.S. President Barack Obama and Hu Jintao, China's president, seen here in April, will meet in nine days to discuss issues including global economic imbalances.
U.S. President Barack Obama and Hu Jintao, China's president, seen here in April, will meet in nine days to discuss issues including global economic imbalances. Photographer: Ron Sachs/Pool via Bloomberg
China may report a $20.8 billion trade surplus for December, adding to pressure for yuan gains nine days before Presidents Hu Jintao and Barack Obama meet to discuss issues including global economic imbalances.
The surplus will exceed $20 billion for the sixth time in seven months, taking the full-year total to $191 billion, according to the median estimate in a Bloomberg News survey of 20 analysts. The customs bureau will release the data Jan. 10.
A stronger yuan may aid China’s fight with accelerating inflation and excessive liquidity, partly caused by inflows of cash from exports, and ease tensions with the U.S. American lawmakers are considering legislation to penalize China for holding down the currency, and officials indicated this week that the nations’ trade gap is on the agenda for the meeting.
“We expect yuan gains to pick up pace ahead of President Hu’s visit,” said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong. “A trade war would not be in China’s interest.”
Three yuan rallies in the past two years can be tied to political events, Bloomberg data shows.
China ended a two-year peg of the yuan to the dollar a week before the June 26-27 Group of 20 summit in Toronto last year and allowed a 0.5 percent weekly gain in the currency, effectively removing the yuan as the focus of the meeting.
Stressing Imbalances
The currency’s appreciation also accelerated in September ahead of the scheduled release of a U.S. Treasury Department currency report and in early November in the lead-up to the G-20 summit in Seoul.
Meeting Chinese Foreign Minister Yang Jiechi to prepare for Hu’s visit, U.S. National Security Adviser Tom Donilon “stressed the importance of effective efforts to reduce imbalances in both the global economy as well as in U.S.-China trade,” a White House statement said Jan. 4. Hu is scheduled to meet with Obama on Jan. 19.
China’s currency valuation and human rights record will be on the agenda, White House press secretary Robert Gibbs said this week.
The yuan climbed 1.2 percent in December, the biggest monthly gain of the quarter, and hit 6.5896 per dollar on Dec. 31, the strongest level since China unified official and market exchange rates at the end of 1993. So far this year, the currency has fallen, closing at 6.6265 yesterday.
The forecast full-year trade excess would be close to the $196 billion gap reported for 2009. While stronger imports have pared the surplus, which reached a record $295 billion in 2008, UBS AG forecasts a rebound to $210 billion this year.
Slower Export Growth
A higher year-earlier comparative base may have pared December’s trade gains. Export growth cooled to 23 percent, compared with a 35 percent gain in November, according to the survey. Imports may have climbed 25 percent, down from a 38 percent increase.
In November, China had a $16.7 billion trade surplus with the U.S., equivalent to about three-quarters of the total excess for the month, according to Chinese government figures.
The foreign ministry yesterday made the case for why the yuan shouldn’t be blamed for the gap. A U.S. ban on exports of high-technology products to the nation, and China’s manufacturing role in the globalized economy, help to explain the imbalance, not the currency’s value, spokesman Hong Lei told reporters at a briefing in Beijing. China has taken steps to boost imports from the U.S., Hong added.
Chinese executives have reduced support for a stronger yuan as they criticize U.S. monetary easing for weakening the dollar and fueling asset bubbles in emerging-market economies.
Chinese Banker’s View
Ma Weihua, chief executive officer of China Merchants Bank Co., said in a Dec. 17 interview that the yuan shouldn’t climb “too fast” and the U.S. Federal Reserve must show more restraint after announcing plans to buy $600 billion of Treasuries.
“The U.S. isn’t taking responsibility. It called on China to adjust its yuan policy but the whole world is suffering from its easing measures,” Ma said in Beijing.
A sustained recovery in the nation’s exports and economic growth, combined with inflation pressures, may encourage officials to allow more currency gains. Overseas shipments rose to a record $153 billion in November, the same month inflation surged to a 28-month high of 5.1 percent.
Singapore Prime Minister Lee Hsien Loong wrote in a commentary published by Bloomberg News this week that a “gradually appreciating yuan will encourage Chinese export industries to restructure and upgrade, help distribute the gains from growth more broadly beyond exports to the rest of the economy, and mitigate inflation.” He add that gains will also “help ease political pressures in the U.S. and tensions in the relationship.”
--Li Yanping, Zheng Lifei, Chinmei Sung. With assistance from Jay Wang. Editors: Paul Panckhurst, Cherian Thomas.
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net
Rate this Page