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China Trade Surplus Widens While Inflation Eases

Yangshan Deep Water Port
A truck driver walks past a shipping container being moved at the Yangshan Deep Water Port, part of China (Shanghai) Pilot Free Trade Zone's Yangshan free trade port area, in Shanghai. Photographer: Tomohiro Ohsumi/Bloomberg

China’s trade surplus widened last month to the largest in more than four years as exports exceeded estimates, in a sign global demand is helping sustain a recovery in the world’s second-biggest economy.

The surplus was $33.8 billion as outbound shipments rose 12.7 percent from a year earlier and imports gained 5.3 percent, data from the General Administration of Customs showed yesterday in Beijing. Consumer prices rose a less-than-estimated 3 percent, a statistics-bureau report showed today.

Stronger demand from abroad may give Premier Li Keqiang more room to implement reforms outlined at a Communist Party meeting last month to increase the role of markets and boost domestic consumption for more sustainable growth in the long term. At the same time, the data triggered speculation among some analysts that capital flows disguised as trade could be boosting the export numbers.

“There are some signs that capital flows may have played a role,” as China’s export figures “diverged significantly” from those of neighbors such as South Korea, Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a note. Industrial-production data due tomorrow “should help verify if the export rebound is real.”

Taiwan reported today that exports were unchanged in November from a year earlier, while South Korea said last week that its outbound shipments rose 0.2 percent during the month.

The Shanghai Composite Index rose less than 0.1 percent today, while the yuan strengthened to a 20-year high.

Analyst Projections

China’s increase in exports topped projections from 41 of 42 analysts surveyed by Bloomberg News, while import gains compared with a median projection of 7 percent. The median estimate for the trade surplus was $21.2 billion, after a $31.1 billion excess in October.

Consumer-price gains compared with a 3.1 percent median estimate of analysts and a 3.2 percent increase in October. The producer-price index fell 1.4 percent from a year earlier, the 21st straight drop, marking the longest period of declines since a 31-month streak running from 1997 to 1999.

“Inflation won’t be a main concern, at least in the near term,” said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong. “This will allow Beijing to focus on pushing reforms while keeping growth stable into 2014.”

Food prices rose 5.9 percent from a year earlier, compared with 6.5 percent in October. Non-food inflation was unchanged at 1.6 percent.

Retail Sales

The statistics bureau is set to report tomorrow on industrial production and retail sales, along with fixed-asset investment for the first 11 months of the year. Figures on new yuan loans, aggregate financing and money supply are due from the central bank over the coming week.

Overseas shipments rose 5.8 percent from October on a seasonally adjusted basis, compared with a 3.8 percent decline in the previous month, customs data showed yesterday.

Exports to the U.S. advanced 17.7 percent in November from a year earlier, the fastest pace since May 2012, while shipments to the European Union were up 18.4 percent, the most in more than two years, based on data compiled by Bloomberg.

China’s foreign-exchange regulator said Dec. 7 that it will boost scrutiny of trade financing and that banks should prevent companies from getting financing based on fabricated trade. The measures are aimed at preventing abnormal foreign-exchange flows, the State Administration of Foreign Exchange said in a statement posted on its website Dec. 7 and dated Dec. 6.

May Crackdown

The latest statement follows a crackdown that began in May after trade data were inflated for several months on fake invoicing used to disguise capital inflows.

Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, said that while he couldn’t rule out “financial irregularities,” the latest growth in shipments to the U.S. and Europe is “unlikely to be because of over-invoicing.”

Steve Wang, chief China economist in Hong Kong at Reorient Financial Markets Ltd., said yesterday’s data don’t suggest the figures are inflated because the gains didn’t come in categories that previously correlated with suspicious practices.

It remains to be seen if the overseas momentum will continue, with a previous purchasing managers’ survey showing new export orders are “not as strong as what people had hoped,” Wang said.

Economic growth may cool to 7.6 percent this quarter following a rebound in the previous period from a two-quarter slowdown, based on a Bloomberg survey last month.

Elsewhere in Asia today, Japan’s growth slowed more than initially estimated in the third quarter and the current account unexpectedly fell into deficit in October.

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