China’s trade surplus narrowed in September but the moderation is unlikely to relieve pressure on Beijing from trade partners demanding greater currency reform to address global imbalances.
The trade surplus hit $16.9bn for the month of September, below August’s $20bn but still uncomfortably high for deficit countries like the US which accuse China of intentionally undervaluing its currency to support domestic industry.
"The fall in China’s trade surplus is unlikely to do much to reduce international pressure on China to move faster on the currency, and today’s data suggest that Beijing has plenty of scope to allow appreciation in the months ahead,” said Royal Bank of Canada economist Brian Jackson.
Last month, the US House of Representatives passed legislation that would impose heavy import tariffs on countries deemed to be intentionally undervaluing their currencies. The proposal is now pending action in the US Senate.
Many of China’s other trade partners have also weighed in amid accusations that Beijing’s intervention to support the renminbi could set off a “currency war” of competitive devaluations around the world.
Under intense pressure from the US, China reacted in mid-June by loosening a de facto peg to the US dollar that was introduced after the onset of the global financial crisis.
But although the renminbi has appreciated slightly faster in recent weeks, Beijing has still only allowed the currency to rise 2.3 per cent against the dollar since June 19, prompting calls in the US for punitive measures even from those who previously favoured a softer approach.
In response, Chinese premier Wen Jiabao last week told the US and Europe to stop pressuring Beijing to revalue and said rapid appreciation would lead to widespread factory closures and serious social unrest in his country.
Chinese exports increased last month to $145bn, up 25.1 per cent from September last year, while imports increased to $128bn, an annual increase of 24.1 per cent.
In August, imports grew 35.2 per cent from a year earlier while exports expanded by 34.4 per cent.
China’s overall trade surplus for the first three quarters fell 10.5 per cent from the same period last year, according to customs data released on Wednesday.
But the $120.6bn surplus for the first nine months is still seen as far too high and as one of the most serious structural imbalances in the global economy today.
