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China's troublesome trade surplus shrinks

Oct. 13, 2010 at 1:01 PM

BEIJING, Oct. 13 (UPI) -- China Wednesday said its monthly trade surplus fell in September from $20 billion to $16.9 billion, although exports rose 25 percent in the month.

Imports jumped almost as high, climbing 24 percent, The New York Times reported.

Along with the trade figures, China said its foreign reserves reached a record $2.65 trillion with an additional $194 billion added in September.

UBS economist Wang Tao said, "The trade surplus is coming down, but it's still going to be $180 billion this year. And the reserve figure was $194 billion. That's huge."

The figures are likely to put pressure on China to allow its currency to appreciate, which would make Chinese products more expensive abroad and make imports more affordable in China. But a stronger yuan would also attract more foreign investment in China, where the government has been trying to ease inflation pressures to avoid a market bubble.

"China's facing a big challenge" Wang Tao said.

Part of the challenge is dealing with international pressure to allow China's currency to appreciate. The pressure comes from foreign governments and unions that believe China's economic growth is based on its export orientation and comes at the expense of jobs elsewhere.

"Pressures from the United States are likely to persist in the run-up to the midyear election," said HSBC economist Qu Hongbin, who predicts that China's monthly trade surplus will continue to shrink through the end of the year.

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