Trade surplus drops again

By Wang Yanlin  |   2008-7-10  |     ONLINE EDITION

CHINA'S trade surplus fell for the third straight month in June, decreasing 20.6 percent from a year earlier to US$21.3 billion, the General Administration of Customs announced today.

Exports grew 17.6 percent to US$121.5 billion, cooling from the increase of 28.1 percent a month earlier. Imports gained 31 percent to US$100.2 billion, also down from May's 40-percent rise.

The surplus last month was higher than for May which settled at US$20.2 billion. The combined figure in the first half settled on US$99 billion, down 11.8 percent from a year ago.

"The unexpected sharp drop of export growth in June shows the pressure brought by the accelerating advance of the yuan's appreciation on overseas shipments and the impact of a weak external demand," said Sun Lijian, an economic professor at Fudan University.

"People feel uncertain about both the global and domestic economic outlook, which may explain the fall of both export and import growth rates."

But Sun was positive about the future of imports because the fundamentals of China's economy were on the whole healthy while exporters might be put under more pressure with the rising yuan as well as the rocketing costs of raw materials and labor.

The Chinese currency has appreciated 6.5 percent against the greenback so far this year, more than doubling the pace for last year, in a bid to balance trade and tame inflation.

Shen Minggao, a Citigroup economist, said external shocks would probably continue to test China's export-oriented growth model, resulting in slower growth and sustained inflation for the rest of the year.

"The Unites States' slowdown has restrained China's dependence on external demand growth, and skyrocketing commodity prices have thwarted the distorted system of input prices," said Shen. "Domestic demand is the key to stabilizing China's growth."

In June, exports to the US only grew 8.9 percent from a year earlier, overshadowed by other traditional trading partners such as the European Union whose purchases from China still managed to expand 27 percent - not to say those emerging markets like Brazil, which reported a 86.3-percent jump in purchases from China.

To curb inflation at home, China limited exports of basic food. In June, the overseas sales of piglets dropped 5.6 percent in volume but expanded 51.5 percent in revenue because of higher prices.The export of corn and edible sugar slumped 96 percent and 65.9 percent respectively in volume.

The EU remained China's largest trading partner through June with bilateral sales worth US$202.1 billion. It was followed by the US and Japan, whose bilateral trade value was US$158.3 billion and US$129.6 billion respectively for the first half.