China’s Trade Surplus May Narrow, Ease Yuan Pressure
China’s trade surplus probably narrowed in April as export growth slowed, easing pressure on the government to allow faster gains by the yuan.
The gap fell 7 percent to $15.5 billion from a year earlier, according to the median estimate of 19 economists surveyed by Bloomberg News.
The government has let the yuan appreciate 4.5 percent against the dollar this year to reduce inflows of trade cash that threaten to fuel inflation in the world’s fastest-growing major economy. Central bank Governor Zhou Xiaochuan said this week that weaker export growth was a factor in the slower pace of gains since the start of April.
“Export growth may slow sharply later this year as overseas demand weakens further,”said Lian Ping, chief economist at Bank of Communications Co. in Shanghai. “If the yuan strengthens too fast, the economy will be hurt by exporters closing businesses and laying off workers.”
Exports probably rose 20.3 percent, slower than the 21.4 percent pace in the first quarter and the 26.8 percent increase a year earlier. Trade data may be released as early as tomorrow.
China’s currency gained 0.35 percent against the dollar last month after a 4.2 percent increase in the first quarter, the biggest jump since a fixed exchange rate ended in 2005.
Capital Inflows
Contracts that let traders bet on the yuan’s value in 12 months fell yesterday by the most since March on speculation China is slowing the pace of gains to limit inflows of speculative capital.
International Monetary Fund Managing Director Dominique Strauss-Kahn said yesterday in Washington that China needs “to go further, and faster, if new misalignments among the major currencies are to be avoided.”
Imports probably climbed 26 percent in April, compared with a 28.6 percent gain in the first quarter and a 21.5 percent increase a year earlier, the survey showed.
Growth in shipments from China to the U.S. slowed in the first quarter as a housing slump threatened to trigger a recession in the world’s biggest economy; China’s trade surplus with the world narrowed for the first time in more than three years.
Weaker global growth this year may further damp export demand. China’s biggest trade fair, in the southern city of Guangzhou, reported declines last month in signed export orders and visits from buyers from the U.S., Europe and Japan, the state-run Xinhua News Agency said.
Global Slowdown
“The unfolding global downturn has not yet shown its full force,”said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. China’s export growth may fall to below 10 percent in the second half of this year, leading to rising unemployment and a “significant”slowing of economic growth, he said.
China’s gross domestic product expanded 10.6 percent in the first quarter from a year earlier and the central bank is seeking to tame inflation that accelerated to an 8 percent pace, the fastest since 1996.
The government is balancing the risks of economic overheating and the threat of slump triggered by waning export demand.
A trade ministry research agency said on May 2 that growth in overseas shipments may slow to as little as 10 percent this year from 26 percent last year.
“We will combat demand and prevent rapid economic growth from turning into overheating,”Vice Finance Minister Li Yong said in Madrid on May 5.
Tags: export, exports, imports, inflation, trade