Surplus in slow lane as traders feel pinch

By Wang Yanlin  |   2008-7-11  |     NEWSPAPER EDITION

CHINA'S trade surplus rose minimally in June from the previous month to US$21.3 billion but it was a 20.6-percent plunge from a year earlier, the General Administration of Customs said yesterday.

A China-based economist believes China may take fiscal action via taxes and a currency clamp. However, there were no measures immediately announced by the central government after the release of the figures.

The economist, Stephen Green of Standard Chartered Bank (China) Ltd, said China may increase tax rebates for some value-added products and the pressure could push the central bank to slow the racing yuan.

Exports expanded by 17.6 percent to US$121.5 billion in June, a sharp decrease from the previous month's 28.1 percent. Imports lifted by 31 percent to US$100.2 billion, also down from May's 40-percent climb.

The surplus last month was a bit higher than the $US20.2 billion of May. The combined figure in the first half settled at US$99 billion, down 11.8 percent from a year ago.

"People feel uncertain about both the global and domestic economic outlook," said Sun Lijian, an economics professor at Fudan University.

But Sun was positive about the future of imports because the fundamentals of China's economy were healthy.

The yuan has appreciated 6.5 percent against the greenback this year, more than doubling the pace of last year as the government tries to balance trade and tame inflation.

In June, exports to the United States grew just 8.9 percent from a year earlier, overshadowed by other traditional trading partners, such as the European Union.

The EU's purchases from China expanded by 27 percent, while emerging market Brazil reported a massive 86.3-percent jump.

The EU was China's largest trading partner in June, with bilateral sales of US$202.1 billion. It was followed by the US and Japan, whose bilateral trade values were US$158.3 billion and US$129.6 billion, respectively, in the first half.