Houston Community News >> China Trade Surplus

10/11/2006 -- China had its second-largest trade surplus on record in September, adding funding to an investment boom the government is trying to cool.

The gap narrowed to $15.3 billion from a record $18.8 billion in August, the Beijing-based customs bureau said today on its Web site. That compared with the $14.35 billion median forecast of 20 economists surveyed by Bloomberg News. For the first nine months, China's trade surplus reached $110 billion, exceeding last year's total of $102 billion.

Premier Wen Jiabao has called the soaring surplus one of China's biggest economic ``problems'' because it's strained trade ties with the U.S. and Europe and flooded the economy with cash, complicating his efforts to slow investment. The gap is adding pressure on China to let its currency gain faster to stem money inflows and avoid trade sanctions.

China allows its currency to trade within a daily band of 0.3 percent either side of the dollar, a so-called managed float.

The U.S. and Europe has accused China of keeping its currency undervalued to make its exports cheaper abroad. The European Union last week imposed duties on 9.7 billion euros ($12.3 billion) of Chinese and Vietnamese footwear. China supplied half of the 2.5 billion shoes sold in Europe last year.

Exports Jump: China's exports rose 30.6 percent last month from a year earlier after jumping 32.8 percent in August, while imports increased 22 percent after gaining 24.6 percent, today's statement said. The Group of Seven nations, meeting in Singapore last month for the annual meetings of the International Monetary Fund and the World Bank, urged China to increase the flexibility of its currency, while backing away from an outright call for a stronger yuan.

China's current account surplus, which measures flows of goods and services as well as transfer payments, widened to $91.6 billion in the first half from $67.3 billion in the year-ago period. The U.S. had a $431.6 billion shortfall on the current account in the first six months.

Domestic Imbalances

The surplus has also helped create imbalances in China's domestic economy. By exporting more than it imports, China has helped underpin an investment boom at home that threatens to leave the nation with idle production lines. The central bank has raised interest rates, forced banks to set aside more money as reserves, and sold bonds to soak up excess funds from the financial system.

China aims to balance the value of imports and exports by 2010 by curbing growth in overseas sales of textiles, metals and other processed goods, the commerce ministry said yesterday.

(Contributed by Bloomberg)