Slowing Chinese imports in April contribute to figure's growth; Chinese economist says full-year gap could be $130 billion.
May 12, 2006: 6:08 AM EDT
BEIJING (Reuters) - China reported another big monthly trade surplus on Friday, adding weight to U.S. calls for a stronger yuan to help reduce imbalances in the global economy.
The surplus for April was $10.5 billion, down a touch from $11.2 billion in March but more than double the April 2005 figure of $4.6 billion, the customs administration said.
China's trade surplus tripled in 2005 to $102 billion and in the first four months of this year it has swollen 58 percent from the same period in 2005 to $33.75 billion.
"Judging from the trend, I think the full-year trade surplus will probably exceed $130 billion," said Song Guoqing, an economist at China Stock Exchange Executive Council, a think tank in Beijing.
He said a ruling on Wednesday by the U.S. Treasury that China was not deliberately holding down the yuan to gain an unfair trade advantage could help Washington achieve its aim. Beijing could have dug in its heels on the currency if the finding had gone the other way.
"The pace of the yuan's appreciation against the dollar is likely to quicken. The fact that the United States did not brand China a currency manipulator has helped create some room for concessions," Song said.
However, the yuan was soft on Friday. Even though the dollar sank to eight-month lows against the euro and the yen, it gained a bit to 8.0060 yuan from 8.0041 at Thursday's close.
Washington believes the yuan would be worth a lot more if it were freely traded because China recorded a balance-of-payments surplus last year equal to 9.3 percent of national income and sits atop an $875.1 billion mountain of foreign currency reserves, the world's largest.
The Treasury expressed disappointment that the yuan was not floating more freely, something that it said was in China's own interest. Currently, the central bank buys most of the dollars flowing into China, thereby keeping a lid on the yuan.
Imports puzzle
The April trade surplus was larger than the $9.0 billion expected by financial markets, mainly because annual import growth slowed to 15.3 percent from 21.1 percent in March.
Ben Simpfendorfer, a strategist with Royal Bank of Scotland in Hong Kong, said the softness was a reaction to a surge in imports of commodities in March and was likely to be temporary.
But he said export growth was also likely to strengthen in coming months, resulting in a higher full-year trade surplus.
Rob Subbaraman with Lehman Brothers in Hong Kong said the dip in imports, if sustained, would be a concern for the rest of Asia, which has benefited hugely from Chinese demand.
"But people will reserve judgment. It's hard to explain, given that oil prices are high and many other indicators are suggesting the economy is strong and, if anything, picking up recently," Subbaraman said.
Annual gross domestic product growth accelerated to 10.2 percent in the first quarter from 9.9 percent in the fourth quarter of 2005. That prompted the People's Bank of China (PBOC), the central bank, to raise interest rates on April 27 for the first time in 18 months.
Despite the red-hot growth, driven by surging investment and credit, inflation remains subdued.
The National Bureau of Statistics reported that consumer price inflation rose 1.2 percent in the year to April, up from 0.8 percent the month before and in line with market forecasts.
"This is still pointing to a benign inflationary environment in China," said Tai Hui, an economist with Standard Chartered Bank in Hong Kong.
Qu Hongbin with HSBC in Hong Kong said he expected consumer price inflation to remain below 2 percent in coming months even if the authorities, as many expect, deregulate energy prices.
"That said, the PBOC still needs to further tighten liquidity to bring investment growth to a more normal growth rate if it wants to avert overcapacity and, hence, financial problems in the future," Qu said in a note to clients.