China's June trade surplus soars 49%
China's trade surplus hit a new record in June, 24.5 billion US dollars prompting fresh calls to Beijing to allow the yuan to appreciate and raising renewed fears over growing imbalances in the economy.
The June figure is up 49% over a year ago, reported Monday China's Ministry of Commerce. Exports surged 23.3% over a year ago to 81.3 billion US dollars while imports grew 18.9% to 66.8 billion US dollars. Analysts had expected a surplus of around 13 billion.
China's trade surplus for the first six months of the year totalled 61.45 billion US dollars, up 55% over the same period in 2005. Analysts expect China's trade surplus, which tripled to a record 102 billion in 2005, to be as high as 180 billion this year.
The expanding surplus has led to calls from the West to punish China for keeping the value of the yuan artificially low with economists voicing concerns that China's mercantilist policies are unsustainable.
The Commerce Ministry has warned Chinese firms to be wary of the antagonism caused in the West by the growing strength of China's economy and surplus. In January the Ministry told companies to keep a low profile when buying businesses in the West and said too much publicity could add to the price of an acquisition, creating what it called the "China Premium".
Actually cheap goods from China have been credited with keeping inflation in check in the West, despite a surge in oil prices. But export earnings have boosted China's currency reserves to the world's largest, 875 billion US dollars. That has provided a massive reservoir of cash for domestic investment, a factor behind recent spikes in markets such as copper and other metals.
In turn, foreign policy makers, including the recently appointed US Treasury Secretary Henry Paulson, who has close links with Beijing, have called on the Chinese government to allow the yuan to gain in value by letting it float freely.
Since the end of April, China's central bank has moved to cool bank lending and investment activity by hiking interest rates, increasing commercial bank reserve requirements and mopping up excess liquidity in the financial system.
But some economists have warned that monetary tightening in China will slow investment and imports, thus contributing to a larger surplus.