China imports trigger trade deficit, add to yuan pressure
April 12, 2010 - 7:13AM
China's trade deficit is likely to be only temporary and surging import costs may fuel inflation, bolstering the case for a stronger yuan.
A surplus may return this month, according to the government and analysts from Bank of America-Merrill Lynch and ANZ Banking Group Ltd. In March, imports jumped 66 percent from a year earlier, leaving a $US7.2 billion trade deficit, China's first since 2004, the customs bureau reported April 10.
Former US Treasury Secretary Henry Paulson said April 10 that a more flexible yuan would spur consumption and give the government an "increasingly necessary" tool for tackling inflation. Successor Timothy F. Geithner's unscheduled visit to Beijing last week stoked speculation that Chinese officials may scrap the currency's peg to the dollar, adopted in July 2008 as a crisis policy.
A revaluation would counter the "risk of considerable overheating in the economy," Leon Brittan, vice chairman of UBS Investment Bank and the former European Union trade commissioner, said in an April 10 interview. "Tim Geithner seems to have gotten the message that the less he shouts and hollers, the greater the chance that the Chinese will do something about it for their own internal reasons."
Brittan spoke at the Boao Forum for Asia on Hainan island in southern China, also the venue of Paulson's comments.
Rising Import Costs
Import prices rose 17 per cent in March from a year earlier as raw-material costs climbed, Huang Guohua, a customs bureau official, said at a briefing in Beijing before the data were released. Net imports of crude oil were the second-highest on record, the bureau said.
"The price effect in commodities imports has strengthened further," said Liu Li-Gang, a Hong Kong-based economist at ANZ Banking Group. China needs "a stronger currency to dampen the negative impact of imported inflation," said Liu, who worked previously at the World Bank and Hong Kong Monetary Authority
The trade deficit is "a temporary phenomenon" and a modest revaluation of the yuan is likely "still on the agenda," Goldman Sachs Group Ltd. analysts said in a note.
Chinese Commerce Minister Chen Deming told state media last week that a deficit would be a blip. A return to a surplus is likely this month after seasonal labor shortages hurt exporters of clothes, shoes and bags in March, the customs bureau said.
Currency Manipulation
"I don't think we can draw any conclusions on the basis of one month's numbers," Robert Hormats, U.S. undersecretary of state for economic, energy and agricultural affairs, said yesterday in an interview at the Boao Forum. "We really have to look at longer-term trends."
Some U.S. lawmakers are pressing the Obama administration to label China a currency manipulator, arguing that an undervalued yuan gives the world's biggest exporting nation an unfair advantage. Geithner has delayed a report to Congress that could contain that assessment and Hormats cited "a spirit of positive cooperation" between the nations on the currency issue.
Fu Chengyu, the chairman of Cnooc Ltd., China's biggest offshore oil explorer, said at the Boao Forum that Chinese companies would have to adapt to any change in yuan policy. The currency trades at about 6.8 per US dollar, with forwards contracts suggesting a 3 per cent gain over the next 12 months.
China's exports gained 24 per cent from a year earlier, after climbing 46 per cent in February. The jump in imports compared with a 45 per cent increase in February.
Economists' Estimates
The March trade shortfall was bigger than the median forecast for a $US390 million deficit in a Bloomberg News survey of 26 economists. Imports from nations such as Japan and South Korea exceeded exports, while China still posted surpluses with the US and the European Union.
The failure of some migrant workers to return to work immediately after a Chinese New Year holiday probably capped exports, Huang, the customs official, said.
First-quarter import growth was the most since records began in 1980 on "booming domestic demand," he added. Vehicle imports almost quadrupled in March from a year earlier, the customs bureau reported.
The median forecasts of economists surveyed by Bloomberg News were for a 55.7 per cent increase in imports and a 27 per cent gain in exports. The deficit compared with a $US7.6 billion surplus in February and an $US18.6 billion surplus in March 2009.
For the first quarter, the trade surplus fell 77 per cent from a year earlier to $US14.5 billion. The smaller numbers are likely to continue as exports face headwinds including a fragile global recovery and protectionism and imports stay strong, Huang said.
China's Commerce Ministry said April 10 that the 2010 trade surplus may fall by a large margin from 2009. That would be on top of last year's 34 per cent decline to $US196 billion.
On April 8, the New York Times reported that the Chinese government is "very close" to announcing a change in currency policy, possibly including a small, one-time jump in the yuan.
April 12, 2010 - 7:13AM
China's trade deficit is likely to be only temporary and surging import costs may fuel inflation, bolstering the case for a stronger yuan.
A surplus may return this month, according to the government and analysts from Bank of America-Merrill Lynch and ANZ Banking Group Ltd. In March, imports jumped 66 percent from a year earlier, leaving a $US7.2 billion trade deficit, China's first since 2004, the customs bureau reported April 10.
Former US Treasury Secretary Henry Paulson said April 10 that a more flexible yuan would spur consumption and give the government an "increasingly necessary" tool for tackling inflation. Successor Timothy F. Geithner's unscheduled visit to Beijing last week stoked speculation that Chinese officials may scrap the currency's peg to the dollar, adopted in July 2008 as a crisis policy.
A revaluation would counter the "risk of considerable overheating in the economy," Leon Brittan, vice chairman of UBS Investment Bank and the former European Union trade commissioner, said in an April 10 interview. "Tim Geithner seems to have gotten the message that the less he shouts and hollers, the greater the chance that the Chinese will do something about it for their own internal reasons."
Brittan spoke at the Boao Forum for Asia on Hainan island in southern China, also the venue of Paulson's comments.
Rising Import Costs
Import prices rose 17 per cent in March from a year earlier as raw-material costs climbed, Huang Guohua, a customs bureau official, said at a briefing in Beijing before the data were released. Net imports of crude oil were the second-highest on record, the bureau said.
"The price effect in commodities imports has strengthened further," said Liu Li-Gang, a Hong Kong-based economist at ANZ Banking Group. China needs "a stronger currency to dampen the negative impact of imported inflation," said Liu, who worked previously at the World Bank and Hong Kong Monetary Authority
The trade deficit is "a temporary phenomenon" and a modest revaluation of the yuan is likely "still on the agenda," Goldman Sachs Group Ltd. analysts said in a note.
Chinese Commerce Minister Chen Deming told state media last week that a deficit would be a blip. A return to a surplus is likely this month after seasonal labor shortages hurt exporters of clothes, shoes and bags in March, the customs bureau said.
Currency Manipulation
"I don't think we can draw any conclusions on the basis of one month's numbers," Robert Hormats, U.S. undersecretary of state for economic, energy and agricultural affairs, said yesterday in an interview at the Boao Forum. "We really have to look at longer-term trends."
Some U.S. lawmakers are pressing the Obama administration to label China a currency manipulator, arguing that an undervalued yuan gives the world's biggest exporting nation an unfair advantage. Geithner has delayed a report to Congress that could contain that assessment and Hormats cited "a spirit of positive cooperation" between the nations on the currency issue.
Fu Chengyu, the chairman of Cnooc Ltd., China's biggest offshore oil explorer, said at the Boao Forum that Chinese companies would have to adapt to any change in yuan policy. The currency trades at about 6.8 per US dollar, with forwards contracts suggesting a 3 per cent gain over the next 12 months.
China's exports gained 24 per cent from a year earlier, after climbing 46 per cent in February. The jump in imports compared with a 45 per cent increase in February.
Economists' Estimates
The March trade shortfall was bigger than the median forecast for a $US390 million deficit in a Bloomberg News survey of 26 economists. Imports from nations such as Japan and South Korea exceeded exports, while China still posted surpluses with the US and the European Union.
The failure of some migrant workers to return to work immediately after a Chinese New Year holiday probably capped exports, Huang, the customs official, said.
First-quarter import growth was the most since records began in 1980 on "booming domestic demand," he added. Vehicle imports almost quadrupled in March from a year earlier, the customs bureau reported.
The median forecasts of economists surveyed by Bloomberg News were for a 55.7 per cent increase in imports and a 27 per cent gain in exports. The deficit compared with a $US7.6 billion surplus in February and an $US18.6 billion surplus in March 2009.
For the first quarter, the trade surplus fell 77 per cent from a year earlier to $US14.5 billion. The smaller numbers are likely to continue as exports face headwinds including a fragile global recovery and protectionism and imports stay strong, Huang said.
China's Commerce Ministry said April 10 that the 2010 trade surplus may fall by a large margin from 2009. That would be on top of last year's 34 per cent decline to $US196 billion.
On April 8, the New York Times reported that the Chinese government is "very close" to announcing a change in currency policy, possibly including a small, one-time jump in the yuan.