China Trade Surplus Drops, Exports Fall

03/28/2008 02:46 am ET | Updated May 25, 2011

BEIJING — China's trade surplus shrank in February as sales of goods to the United States fell, the government said Monday, but analysts said exports should bounce back now that winter storms that disrupted the economy have passed.

The 63 percent drop in the trade gap from a year earlier was due partly to a longterm slowdown in export demand, but February was an unusually weak month, analysts said.

"We expect the export figures to rebound in March, but continue to anticipate a more moderate slowdown in export growth over the course of the year," Jing Ulrich, JP Morgan's chairwoman of China equities, said in a report to clients.

February's trade surplus was $8.6 billion, down from $23.7 billion in the year-earlier period, according to China's customs bureau.

The data reflected slowing growth in exports to the United States and Europe while China's still-robust economy is driving demand for imported energy, consumer goods and industrial equipment.

China's imports in February surged 35 percent to $78.8 billion from the year-earlier period, according to the customs agency. The rate of export growth, meanwhile, plunged to 6.5 percent from January's 26 percent.

Exports to the United States fell 5 percent in February to $16.4 billion, while imports of American goods jumped 33 percent to $6.1 billion.

Beijing is under pressure from the United States and the European Union to ease trade barriers and currency controls that they say are adding to its swollen trade surplus. Some American lawmakers are calling for punitive action if Beijing fails to act.

Chinese leaders say they are not actively pursuing a large trade surplus. The communist government is prodding China's consumers to spend more in hopes of reducing reliance on exports and industrial investment to drive growth.

The February trade gap was the smallest since March 2007, but that month's $6.9 billion gap was considered abnormally low in a fluke caused by changes in export-tax policy. It has been two years since China regularly posted monthly trade surpluses under $15 billion.

Economists say narrowing the trade gap could help China restrain pressure for prices to rise by stanching the flood of cash coursing through the economy.

Consumer inflation rose to 7.1 percent in January, its highest level in 11 years, and is expected to surpass that when figures for February are reported Tuesday.

The six-month-old inflation spike has been limited mostly to food, but wholesale price data released Monday showed costs of industrial raw materials up sharply, suggesting pressure for across-the-board inflation might be increasing. Wholesale prices rose 6.6 percent in February, the fastest rate in more than three years, the government reported.

Regulators have repealed rebates of taxes on some exported goods and imposed curbs on exports of steel and other goods deemed too dirty or energy-intensive. The government also has restricted grain exports in an effort to rein in a rise in food prices.

The trade surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 15 percent to $10 billion, according to the government data.

Chinese and EU officials are due to meet in April in Beijing to launch a regular high-level dialogue aimed at defusing trade tensions.

China holds similar twice-year meetings with senior American officials.

The U.S., EU and other trading partners are pressing Beijing to ease controls that they say keep its currency, the yuan, undervalued and give Chinese exporters an unfair price advantage.

Premier Wen Jiabao said last week that Beijing would pursue a more flexible exchange rate. The yuan has been allowed to rise by about 16 percent against the U.S. dollar since mid-2005, and a faster increase would help to narrow the trade gap by making China's goods more expensive abroad and making foreign imports more attractive to Chinese consumers.

But concern over possible job losses has prompted trade officials to argue against letting the yuan strengthen faster.

The sharp drop in export growth in February could add fuel to arguments by Chinese exporters that further loosening of exchange rate controls could wipe out thousands of jobs.


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