Yuan under pressure as trade surplus rises 41pc

China's trade surplus in July grew faster than expected to US$31.5 billion, up 41 per cent from June's US$22.3 billion, China Customs data released yesterday showed.

The rise exceeded economists' consensus of a US$27.4 billion surplus, after the value of China's exports rose 20.4 per cent to a record US$175.13 billion in July. This exceeded the 17.9 per cent growth recorded in June and economists' forecast of 17 per cent. Imports were up 22.9 per cent to US$143.64 billion, exceeding the forecast of 22 per cent and June's 19.3 per cent rise, the data showed.

Trade with the US showed signs of a marked decline, with growth in Chinese exports to the US tapering off to 13.3 per cent in the second quarter of this year from 21.4 per cent in the first quarter, according to China Customs. The financial roller coaster in the US and EU in the past few days prompted Politburo leaders, led by Chinese Premier Wen Jiabao, to meet on Tuesday to discuss ways to contain risks and keep a close eye on unfolding developments.

The meeting came on the same day that Federal Reserve chairman Benjamin Bernanke pledged to keep US interest rates near zero until mid-2013 in an attempt to calm global financial and stock markets.

'These are words without actions,' Hong Kong Small and Medium Enterprises Association chairman Danny Lau Tat-pong said of Bernanke's statement. 'The feel-bad factor of shoppers will sting manufacturers in coming months.'

As the US teeters on the verge of a double-dip recession and Europe's debt crisis shows no signs of easing, exporters and economists expect China to embrace the consequence of weaker demand this year.