Surplus on trade shrinks further

PUBLISHED : Wednesday, 14 July, 1999, 12:00am
UPDATED : Wednesday, 14 July, 1999, 12:00am

Mainland exports dived again last month after a spurt in May as imports continued to surge, further shrinking the country's trade surplus.

Economists yesterday said that while Beijing was still expected to maintain a trade surplus of about US$20 billion, the deteriorating balance of international payments was likely to put more pressure on the yuan to devalue.

Shawn Xu Xiaonian, general manager of research at China International Capital, yesterday said: 'Although I believe the yuan is unlikely to devalue this year, pressure is building up.' Exports for last month fell 1.3 per cent year on year to $15.46 billion after rising by 4.2 per cent in May - the first increase this year, said Xinhua news agency, quoting customs figures.

Imports jumped 22.8 per cent year on year to $14.54 billion.

In the first six months, exports fell 4.6 per cent to $83 billion while imports rose 16.6 per cent to $75 billion, giving the country a surplus of $8 billion.

Beijing posted a record trade surplus of $43.59 billion last year.

Despite the dismal figures, Xinhua said mainland exports had shown signs of recovery, falling 1.3 per cent year on year in the second quarter, compared with 7.9 per cent in the first quarter.

'The recovery between the first and second quarters of the year was the first in 21 months, since the Asian financial crisis began in autumn 1997,' Xinhua said yesterday.

The agency said the growth in exports to the United States and Europe was sustained in the first half, albeit at lower rates. Exports to the US grew 8.4 per cent and to Europe, 0.6 per cent.

It said exports to South Korea, Japan and Southeast Asian countries had returned to positive territory. In particular, exports to South Korea have held to double-digit rates for four consecutive months this year.

However, many economists were still pessimistic about mainland exports for the year.

Mr Xu said he expected a fall of 5 per cent for the year.

He said the surge in imports mainly reflected the government's success in cracking down on rampant smuggling rather than its success in stoking domestic demand.

'Domestic demand is weak, ' Mr Xu said.