China swings back to trade surplus
Cary Huang in Beijing
The mainland swung to a trade surplus in April after a rarely seen deficit in March, but exports only narrowly topped imports, providing little comfort for policymakers fearful of another round of global financial woes triggered by the European sovereign debt crisis.
The country recorded a trade surplus of US$1.68 billion in the month, defying expectations of a second straight deficit after March's US$7.2 billion shortfall. But the April surplus was a decline of 89 per cent from the surplus recorded a year earlier.
Exports rose an annual 30.5 per cent in April, while imports jumped 49.7 per cent from a year earlier, according to data from the General Administration of Customs.
Tom Orlik, China analyst with Stone & McCarthy Research Associates, said the data suggested March's deficit was an aberration, rather than signalling a structural shift in China's trade account.
Mingchun Sun, chief economist with Nomura International, said imports in April fell to a more reasonable level after a particularly strong sprint in March.
He forecast imports will grow by 26 per cent year-on-year in 2010 because of higher crude oil price expectations, while exports will continue to recover, resulting in annual growth of 11 per cent. 'Since we expect imports to grow much stronger than exports this year, we also expect China's trade surplus to narrow to US$70 billion in 2010 from US$196 billion in 2009,' Sun said.
Despite the recovery in the trade account, analysts are divided over whether Beijing will allow the yuan to appreciate amid growing concern over the European debt crisis.
Beijing re-pegged the yuan against the US dollar in mid-2008 - after a 21 per cent appreciation in the previous two years - in an effort to cushion China's slump in exports amid the global financial woes.
Minister of Commerce Chen Deming and other top officials seized on the March trade deficit to argue against the need to revalue the country's currency.
But most economists said at the time that it was a short-term event since it partly reflected rising commodity and raw material prices in international markets that would eventually be passed on to finished goods for export.
Orlik said a vanishing trade surplus combined with the emergence of a sovereign debt crisis in Europe may have changed the calculation on the yuan exchange rate as the latest crisis created uncertainty in the outlook for trade.
'The April data will do little to strengthen the argument from China's trade partners that appreciation is a necessary part of the search for balance in the global economy,' Orlik said.
But analyst Wang Hu said the rising trade surplus will add pressure to allow the yuan to appreciate.
'We expect the yuan to resume its appreciation in the second quarter as a result of the rising trade surplus,' Wang said.
Gao Shanwen, chief economist with Essence Securities, said the Greek crisis signalled that the international outlook remained uncertain, which will affect China's export performance in coming months.
'The impact of the Greek debt crisis will be reflected in China's trade performance in the second half of this year,' Gao said.
Orlik said the crisis had taken heat out of the yuan debate. 'For the Europeans, a silver lining to the Greek cloud has been a fall in the value of the euro against the yuan - strengthening the competitiveness of European exporters,' Orlik said.