China Sees Increase in Trade Surplus

Amid reports of increased manufacturing, China’s export rate has increased in December, showing a widening trade surplus. Economists see this widening gap between imports and exports as an indicator of a slow patch in the economy. CNNMoney Reports:

Chinese exports increased 13.4% in December, the General Administration of Customs reported Tuesday. Aside from blips due to New Year holidays, that marked the slowest export growth since November 2009.

Vice Commerce Minister Zhong Shan cautioned yesterday that China is facing a “more severe export situation” in 2012, official news agency Xinhua reported.

China’s trade surplus — which measures the gap between exports and imports — widened to $16.5 billion in December, a surprise to economists who were predicting it would narrow.

“Strong demand from the growing Chinese market is good news for global growth. And that’s where the disappointment comes in,” Jennifer Lee, senior economist with BMO Capital Markets said in a research note, pointing to the data that showed imports grew 11.8% year-over-year, about half their rate in November.

This gap in trade growth was the slowest China has experienced in two years, but there is still speculation about last year’s trade surplus totals. The Australian adds:

“The trade surplus isn’t shrinking so rapidly, likely due to recent stability in the European Union and the US, and export growth isn’t slowing quite so sharply as expected,” HSBC economist Ma Xiaoping said.

For the full year, China’s trade surplus totalled $US155.14bn, down 15.3 per cent from 2010, based on publicly available data.

But according to the customs bureau, the surplus was down just 14.5 per cent, suggesting the bureau may have revised the year-earlier figure without announcing the change.

The declining surplus is likely to be cited by Chinese officials as evidence that the country is making progress in rebalancing towards domestic demand.

Exports last year rose 20.3 per cent from a year earlier and imports were up 24.9 per cent.

In order to deal with the trade surplus numbers, economists are expecting the government to continue to fine-tune their economic policies. Beijing had previously cut the banks’ reserve requirements by 50 percent. Reuters adds:

Economists see more cuts to required reserve ratios (RRR) coming, further tweaks to fiscal policy and quite possibly intervention to slow the steady appreciation of the yuan, which gained about 4.5 percent against the dollar in 2011.

“I think the authorities will intensify the fine-tuning. I think we will get an RRR cut pretty quickly, and I think the slowdown in the pace of RMB (yuan) appreciation will continue,” Tim Condon, head of Asian economic research at ING in Singapore, said.

A Reuters poll in December showed analysts thought China could lower banks’ reserve requirements by another 200 basis points in 2012, but that a cut in interest rates was only likely if economic growth slips below 8 percent.

Many economists believe China needs to grow its economy by about 8 percent, at least, if it wishes to create enough jobs to sustain current employment rates.

See also Twelve Challenges for China in 2012 and Manufacturing Index Defies Negative Forecast via CDT.

January 10, 2012 4:51 PM
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