BEIJING (Reuters) - China’s trade surplus in June topped expectations on surprising strength in exports that suggests the global economic recovery has remained on track despite worries about a fresh slowdown.
Many analysts believe the export momentum will soon wane, but for now the latest numbers give ammunition to critics who say that Beijing is holding down the value of its yuan currency to gain an unfair trade advantage.
Chinese exports in June rose 43.9 percent from a year earlier, beating forecasts of a 38 percent rise, the customs administration said on Saturday. Imports rose 34.1 percent year on year, in line with projections.
That left China with a trade surplus of $20.0 billion, its largest in nine months. The market had expected a surplus of $13.8 billion.
“Exports were better than expected because the negative impact from the European debt crisis was not as serious as the market had feared,” said Liu Nenghua, an economist with Bank of Communications in Shanghai.
“Growth in China’s exports will slow down in coming months, that’s for sure,” Liu added. “But there will be no sharp drop.”
The strong trade numbers could help ease fears — for a time, at least — about the potential for a skid in the Chinese economy after the government’s campaign to clamp down on the red-hot property market.
They could also lead to fresh calls for Beijing to let the yuan rise more quickly. China de-pegged its currency from the U.S. dollar on June 19, after keeping it locked in place for 23 months to help exporters ride out the global economic turmoil.
The yuan has gained just 0.78 percent against the dollar since then, and pressure is again building on U.S. President Barack Obama to take a stronger line against Beijing. Critics say an undervalued exchange rate is an artificial boost for Chinese exporters, robbing other countries of jobs and growth.
As if anticipating this criticism, Zheng Yuesheng, statistics chief for the customs bureau, noted that China’s trade surplus in the first half of 2010 was about 40 percent less than in the same period last year.
“Our foreign trade has continued to move toward a roughly balanced direction,” he said on state television.
Trade disputes with the United States and Europe would be an additional source of uncertainty for markets at a time of great concern about the fragility of the global recovery.
China’s wider trade surplus contained another seed of unwelcome news. It pointed to the beginning of slacker domestic demand in the world’s fastest-growing major economy.
Over the past year, with the U.S. and European economies struggling to regain their footing, global firms and investors looked to China to make up for the shortfall.
China’s imports grew just 0.9 percent from May after calendar adjustments, the customs authority said. Imports of crude oil and soybeans still managed to hit monthly records, but imports of copper and iron ore slowed.
Analysts said that China’s export strength might be transitory. Shipments could slow in coming months as U.S. fiscal stimulus fades and European governments cut back on spending.
Though sales to emerging markets surged in June, they cannot compensate for a downturn in demand from major economies, Tom Orlik, an economist with Stone & McCarthy Research Associates in Beijing, said.
“A resurgent trade surplus will clearly strengthen the argument for rapid appreciation of the yuan,” he said. “But with the global recovery on slippery sands, the outlook for China’s exports is not as stable as the last two months of data suggest.”
That point was echoed by Wang Han, an economist with research firm CEBM in Shanghai.
Data due to be released on July 15 will probably show faster consumer price inflation, but the government will not want to tighten monetary policy, because domestic investment is flagging and exports, too, will start to slow, he said.
“It will be difficult for the central bank, but I think there is a strong possibility that China will not raise interest rates this year,” Wang said.
The market consensus is for China to desist from raising rates until the second quarter of 2011, according to a Reuters poll published on Friday.
Additional reporting by Zhou Xin and Langi Chiang; Editing by Alan Wheatley