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China shrugs off global fears with export strength

China shrugs off global fears with export strength
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First Published: Sat, Jul 10 2010. 04 23 PM IST
Beijing: China’s trade surplus in June topped expectations on surprising strength in exports that suggests the global economy maintained momentum despite worries about a fresh slowdown.
Chinese exports in June rose 43.9% from a year earlier, beating forecasts of a 38% rise. Imports rose 34.1% year on year, in line with projections.
That left China with a trade surplus of $20.0 billion, its largest in nine months. The market had expected a surplus of $13.8 billion.
“Exports were better than expected because the negative impact from the European debt crisis was not as serious as the market had feared,” said Liu Nenghua, an economist with Bank of Communications in Shanghai.
“Growth in China’s exports will slow down in coming months, that’s for sure,” Liu added. “But there will be no sharp drop.”
The strong trade numbers could help ease fears -- for a time, at least -- about the potential for a skid in the Chinese economy after the government’s campaign to clamp down on the red-hot property market.
It could also lead to fresh calls for Beijing to let the yuan rise more quickly. China de-pegged its currency from the US dollar on 19 June, after keeping it locked in place for 23 months to help exporters ride out the global economic turmoil.
The yuan has gained just 0.78% against the dollar since then, and pressure is again building on US President Barack Obama to take a stronger line against Beijing. Critics say a persistently undervalued exchange rate gives China an unfair trade advantage, robbing other countries of jobs and growth.
Concerns lurk
In that respect, the wider Chinese trade surplus is not entirely welcome news for the global economy.
Over the past year, with the US and European economies struggling to regain their footing, global firms and investors looked to China to make up for the shortfall in their demand.
China’s slowdown in import growth, from a year-on-year pace of 48.3% in June, was in large part caused by a higher base of comparison, but it also pointed to a slackening in domestic demand as investment flags.
Imports grew 0.9% from May after calendar adjustments, the customs authority said.
And if a sustained rebound in China’s exports adds fuel to trade disputes with Europe and the US, that would be an additional source of uncertainty for markets at a time of great concern about the fragility of the global recovery.
But analysts said that China’s export strength might be transitory. Shipments could slow in coming months as US. fiscal stimulus fades and European governments ut back on spending.
Though sales to emerging markets surged in June, they cannot compensate for a downturn in demand from major economies, Tom Orlik, an economist with Stone & McCarthy Research Associates in Beijing, said.
“A resurgent trade surplus will clearly strengthen the argument for rapid appreciation of the yuan,” he said. “But with the global recovery on slippery sands, the outlook for China’s exports is not as stable as the last two months of data suggest.”
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First Published: Sat, Jul 10 2010. 04 23 PM IST