Business News : China trade momentum softens in face of global woes

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BEIJING (Business News) - China's trade surplus narrowed in September for a second straight month as growth of exports and imports both pulled back, reflecting global economic weakness and domestic cooling, and giving Beijing ammunition to resist U.S. pressure to allow the yuan to rise more quickly.


Exports increased 17.1 percent last month from a year ago, slowing from a 24.5 percent gain in August, and imports increased 20.9 percent, compared with August's 30.2 percent rise, the customs office said on Thursday.

That created a trade surplus of $ 14.5 billion in September, compared with $ 17.8 billion in August and $ 31.5 billion in July. The rolling 12-month trade surplus reached $ 180.3 billion in September, dipping from $ 182.7 billion in August.

"Export growth in September was much lower than market expectations, showing the sputtering external economy, and we expect the slowing export trend to continue in the coming months," said Wang Hu, an analyst for Guotai Junan Securities in Shanghai.

Economists surveyed by Business News had expected Chinese exports to grow 20.7 percent in September and imports to rise 24.5 percen t, bringing the monthly surplus to $ 16.3 billion.

"Going forward, the effect of weakening external demand will slow export growth to mid- to lower teens. We export import growth to hold up better," Jian Chang, an economist for Barclays in Hong Kong said in response to the latest data.

"The trade surplus is narrowing on a trend basis. I think this shows that the Chinese economy is (in the midst) of rebalancing."

China could point to a reduced trade surplus as evidence that it is moving to deal with economic imbalances that have riled lawmakers in the United States.

The U.S. Senate approved a controversial bill on Tuesday aimed at forcing Beijing to push the yuan higher against the dollar, which supporters argue would reduce a U.S. trade deficit with China of more than $ 250 billion.

"The shr inking trade surplus and easing imported inflation may reduce some pressure for Beijing to quicken the pace of yuan appreciation," said Du Zhengzheng, an analyst at China Development Bank Securities in Beijing.

"With exports growing at a slower-than-expected pace, I think Beijing could slow down the pace of nudging up the yuan in the coming months for fear of hitting its exports too much, especially when the external demand is weakening.

"But the main direction for Beijing's yuan regime reform would not be changed, which is to widen the trading band and guide two-way movements."

In month-on-month terms, exports rose in September after calendar adjustment by 1.6 percent, versus a decline of 3.3 percent in August and a rise of 5.4 percent in July.

That suggested the world's No. 2 economy is feeling the pinch of Europe's worseni ng debt crisis and slowing growth in the United States.

China's trade surplus with the European Union was $ 12.9 billion in September, down from $ 14.8 billion in August. China's export growth to the 27-member EU bloc grew 9.8 percent in September from a year ago, down sharply from the 22.3 percent growth recorded in both August and July.

Although the fate of the U.S. currency bill is uncertain, it has drawn sharp rebukes from Beijing. The central bank argued that a stronger yuan would not on its own reduce the bilateral trade imbalance nor save American jobs.

China's overall balance of trade with the United States, however, remained unchanged in September from August; in both months China recorded a $ 20.0 billion surplus.

But Beijing is unlikely to begin immediately loosening domestic policy settings in the face of the tep id trade outlook, said Shi Lei, an analyst for Pingan Securities in Beijing, noting that the trend was no shock to policy-makers.

"As falling external demand is expected by Chinese policymakers, any broad-based loosening of the monetary policy is unlikely in the short term until we see a clear fall in inflation," said Shi.

"The window for possible policy easing is around November and December."



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