China Posts Record Surplus Of $13 Billion
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China posted a record $13 billion trade surplus in May and inflation accelerated, increasing pressure on the government to allow the yuan to strengthen.
The surplus topped the $12 billion median estimate of 21 economists in a Bloomberg News survey and widened from $10.5 billion in April. A separate government report showed consumer prices rose 1.4% from a year earlier, the most in four months.
Last month’s 25.1% jump in exports is undermining government efforts to control inflation by pumping China’s economy with cash. A stronger currency would help reduce the imbalance and appease American lawmakers who want to stem a record trade deficit with China and are calling for tariffs on Chinese goods.
“The government wants to keep a lid on money supply and lending growth to prevent it from stoking inflation and asset price bubbles,” an economist with Standard Chartered Bank in Hong Kong, Tai Hui, said. “There’s a considerable inflow of money into the economy and it’s a challenge for the central bank to stop it adding to the money supply.”
Royal Bank of Scotland economist Ben Simpfendorfer forecast the trade gap will widen to $150 billion this year – almost equal to the gross domestic product of Thailand – from last year’s record $102 billion. Exports reached $73.1 billion in May and imports rose to $60.1 billion, the report showed.
China’s money supply jumped 19.5% in May, Shanghai Securities News said June 9. That would be the fastest gain since December 2003.
A stronger currency would slow exports, which helped drive China’s 10.3% economic growth in the first quarter. People’s Bank of China Governor Zhou Xiaochuan raised benchmark lending rates in April to cool lending for investment and has pledged to gradually withdraw from the nation’s currency market.
The yuan has gained 1.2% against the dollar since July’s 2.1% revaluation. The Chinese currency weakened for a second day today on speculation rising interest rates in America will lure investors away from Asian assets. It fell to 8.0139 against the dollar as of 1.24 p.m. in Shanghai according to data compiled by Bloomberg.
