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China's Trade Surplus Plunges 63 Percent

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[March 10, 2008]  BEIJING (AP) -- China's trade surplus plunged in February as sales of goods to the United States and Europe weakened and snowstorms disrupted the economy, the government reported Monday, but analysts said it appeared to be a onetime drop and exports should rebound.

The 63 percent drop in the trade gap from a year ago was due partly to a global slowdown but also to storms that hampered shipping and forced some factories to close, economists said. They said exports also looked unusually small because they were compared with a strong month last February.

"We think the sharp slowdown in China's export growth in February is temporary," Lehman Brothers economist Mingchun Sun said in a report to clients.

China is under pressure from the United States and the European Union to ease import barriers and currency controls that they say are adding to its multibillion-dollar surplus. Some American lawmakers are calling for trade sanctions.

China's trade surplus in February totaled $8.6 billion, down from a $23.7 billion in February 2007, according to customs agency data.

It was the smallest monthly surplus since March 2007, but that month's $6.9 billion gap was considered abnormally low in a fluke caused by changes in export-tax policy. It has been two years since China regularly posted monthly trade surpluses under $15 billion.

"We would pay more attention to the combined January-February surplus, which remained significant at $28 billion," said Goldman Sachs economists Yu Song and Hong Liang said in a report to clients.

China's imports in February surged 35 percent to $78.8 billion from the year-earlier period, according to the customs agency.

Exports grew by 6.5 percent to $87.4 billion -- a much slower rate than January's 26 percent. That could spur worries that slowing U.S. demand will hurt Chinese exporters and could wipe out thousands of jobs.

Chinese leaders say they are not actively pursuing a large trade surplus. The communist government is prodding China's consumers to spend more in hopes of reducing reliance on exports and industrial investment to drive growth.

February's monthly trade gap with the United States, China's No. 2 trading partner, shrank 23 percent to $9.4 billion compared with the same month in 2007, the customs agency said.

China's exports to the United States fell 5 percent in February to $16.4 billion, while imports of American goods jumped 33 percent to $6.1 billion.

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The surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 15 percent to $10 billion, data showed.

Chinese and EU officials are due to meet in April in Beijing to launch a regular high-level dialogue aimed at defusing trade tensions.

China holds similar twice-year meetings with the United States.

The U.S., EU and other trading partners are pressing Beijing to ease controls that they say keep its currency, the yuan, undervalued and give Chinese exporters an unfair price advantage.

Premier Wen Jiabao said last week that Beijing would pursue a more flexible exchange rate. The yuan has been allowed to rise by about 16 percent against the U.S. dollar since mid-2005, and a faster increase would help to narrow the trade gap by making China's goods more expensive abroad and making foreign imports more attractive to Chinese consumers.

But concern over possible job losses has prompted trade officials to argue against letting the yuan strengthen faster.

The flood of import revenues also is straining the central bank's ability to rein in pressure for prices to rise.

Consumer inflation rose to 7.1 percent in January, its highest level in 11 years, and is expected to surpass that when figures for February are reported this week.

Also Monday, the government said producer prices, a key inflation indicator, rose 6.6 percent in February over the year-earlier period.

The spike in inflation has been driven by food costs, but the data Monday showed prices of oil, iron and other raw materials rising sharply, suggesting that pressure was increasing for across-the-board price hikes was increasing.

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On the Net:

Chinese customs agency (in Chinese): http://www.customs.gov.cn/

[Associated Press; By JOE McDONALD]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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