China Yearly Trade Surplus Narrows
By AARON BACK
BEIJING—China last year posted its smallest annual trade surplus since 2005, data released on Tuesday showed, suggesting it's becoming less reliant on exports—and potentially undermining growing criticism from the U.S. and others over its trade practices.
Last year's drop marked the third consecutive fall in China's trade surplus. The data came just hours ahead of U.S. Treasury Secretary Timothy Geithner's arrival for a two-day visit to discuss trade and currency issues, as well as the Obama administration's push for tougher sanctions on Iran, with senior Chinese leaders.
The data also came a day after The Wall Street Journal, citing people familiar with the matter, reported that the Obama administration would create a government panel to monitor Chinese trade practices. China's trade surplus with the U.S. is sure to be a contentious issue in the coming November elections. Officials at China's Foreign Ministry weren't available to comment on Tuesday.
The narrowing surplus likely will be cited by Chinese officials as evidence of progress in rebalancing the economy toward domestic demand. Leaders in the U.S. and a number of other countries criticize China's handling of its currency, arguing that Beijing suppresses the yuan's appreciation to gain an unfair trade advantage.
The trade surplus rebounded unexpectedly in the month of December, due to weak import growth and only a slight slowdown in export growth, but economists said the overall trend of a falling surplus is likely to remain as the economies of export markets such as the U.S. and Europe remain weak. In a note to clients, IHS Global Insight economists Xianfang Ren and Alistair Thornton, called the December rebound likely only a temporary "mild reprieve."
"The trade surplus will continue to shrink in coming years, with overall foreign-trade growth slowing," they said, though they added "it will be a long time before China turns into a net importer."
China's trade surplus fell to $155.14 billion in 2011, down 14.5% from 2010, according to figures from General Administration of Customs. As a percentage of gross domestic product, a ratio followed by economists, the surplus declined to around 2.2%, based on the International Monetary Fund's forecast for 2011 GDP, from around 3.1% in 2010.
The shrinking surplus likely points to a slowdown in the yuan's appreciation this year, say economists, who generally expect its value against the dollar to rise around 2% to 3% in 2012, compared with 4.7% in 2011.
Despite the overall decline in the surplus, China's most contentious imbalance, the surplus with the U.S., widened in 2011 to $202 billion, from $181 billion in 2010. Analysts say the U.S. hasn't benefited as much as commodity producers such as Australia and Brazil from China's surging imports of raw materials. In 2011, China ran a $20.52 billion trade deficit with Brazil and a $48.81 billion deficit with Australia.
For December, the trade surplus widened unexpectedly to $16.52 billion from $14.53 billion the month before, as imports slowed sharply. Economists had expected the surplus to narrow to $7.8 billion, according to an earlier survey.
Export growth slowed slightly; exports in December were up 13.4% from a year earlier, compared with a 13.8% pace in November. Import growtt slowed more dramatically, to 11.8% in December from 22.1% in November.
The slower-than-expected import growth could indicate China's domestic demand is weakening. "Importers have finally realized that the economic slowdown is more permanent than they thought, and they have started to adjust their behavior to this reality," Societe Generale economist Wei Yao said.
Still, economists warned against reading too much into the slowdown in imports.
"Trade data is highly volatile, it is often the case that a month of very strong data is followed by a month of very weak data," Goldman Sachs economist Yu Song said in a note to clients. "Hence it is better to look at the smoothed growth over a period of time."
For the full year, imports were up 24.9%, outpacing export growth, which came in at 20.3%.
Correction
In 2011, China ran a $20.52 billion trade deficit with Brazil and a $48.81 billion deficit with Australia. An earlier version of this article incorrectly said the deficits were $7.1 billion and $10.7 billion, respectively.
Source:
http://online.wsj.com/article/SB ... 51632896924706.html