Trade surplus set to exceed last year's
The mainland's trade surplus this year is likely to exceed that of last year, making it tougher for the government to balance trade and avoid friction with trading partners.
Ministry of Commerce spokesman Shen Danyang said yesterday that a higher trade surplus was probable as imports were expected to weaken more than exports.
The trade surplus last year totalled US$155.14 billion. In the first half of this year, the surplus jumped 56.4 per cent from a year ago to US$68.92 billion. Last month alone, exports surpassed imports by a three-year high of US$31.72 billion as domestic demand softened while global prices of energy and raw materials fell.
Shen Jianguang, an economist at Mizuho Securities, said: 'The rising trade surplus is expected to lead to yuan appreciation by up to 3 per cent in 2012.' The yuan has weakened against the US dollar by about 1.3 per cent so far this year.
Ministry spokesman Shen said the mainland's goal of achieving trade balance and reducing surplus remained unchanged. Analysts see it as a reaffirmation of Beijing's stance to avoid criticism that the world's biggest exporter supports local firms by undervaluing its currency artificially while granting foreign companies limited access to the Chinese market.
The World Trade Organisation said on Monday that Beijing had violated trade rules through regulations that helped China UnionPay dominate the lucrative electronic payment market. The ministry said yesterday that Beijing had reservations over the ruling, which largely backed allegations filed by the United States accusing China of discrimination against foreign bank cards.
Foreign investors are continuing to pour money into China, but complaints about fair market treatment, policy transparency and the legal environment have risen in recent years.
Last month, foreign direct investment into the mainland fell 6.9 per cent year on year to US$12 billion, with 2,444 foreign firms setting up shop - down 16.3 per cent from a year ago. In the first six months of this year, FDI dropped 3 per cent year on year to US$59.1 billion. The Commerce Ministry attributed it to government curbs on real estate.
'Stripping out the property sector, FDI was down only 0.1 per cent year on year to US$46.8 billion in the first half,' spokesman Shen said, adding that full-year FDI would show steady growth from last year.
Chang Jian, an economist at Barclays Capital, said capital outflow from the mainland was likely to have continued in the second quarter, going by the central bank's foreign-exchange purchases position that showed a small net increase of US$1.8 billion during the period.
The ministry says outbound direct investment surged 48.2 per cent year on year to US$35.42 billion in the first half, with a third of the funds used in mergers and acquisitions. Investments going to Hong Kong soared 58.9 per cent, funds heading to Asean countries rose 34.3 per cent, while those to the United States went up 28.2 per cent.
The US Chamber of Commerce released a report titled The Faces of Chinese Investment in the United States, aiming to facilitate investment from Chinese firms. The chamber's president and chief executive Thomas Donohue said: 'The US market is highly competitive and open to the Chinese investment. There are challenges, but they can be managed.'
The percentage increase in Chinese imports last month from a year earlier - less than half the 12.7 per cent forecast in a Reuters poll