China's August trade surplus 2nd-highest this year

[September 10, 2010]  BEIJING (AP) -- China's trade surplus hit its second-highest level this year in August, likely fueling U.S. demands for Beijing to ease currency controls.

Export growth weakened as global demand cooled while import growth rebounded in a new sign the slowdown in the world's second-biggest economy might be less severe than expected, government figures showed Friday.

The $20 billion trade surplus will fuel demands by Washington and others for Beijing to ease controls they say keep its yuan undervalued and give Chinese exporters an unfair price advantage. American lawmakers hold hearings this month and some are pushing for sanctions as they face pressure to create jobs ahead of November elections.

"There certainly will be pressure from the United States," said economist Lu Zhengwei at Industrial Bank in Shanghai. "Their appetite is very big."

In June, Beijing ended an 18-month-old link between the yuan and the dollar and said it would allow a more flexible exchange rate, but the Chinese currency has risen by less than 1 percent since then.

"The likelihood of congressional action targeting China for pegging its currency to the dollar is increasing at an alarming rate," said economist Derek Scissors of the Heritage Foundation in Washington in a report.

August export growth fell to 34.4 percent over a year earlier from July's 38.1 percent, the Chinese customs agency reported. But import growth rebounded to 35.2 percent from the previous month's 22.7 percent.

Strong imports are a rare bright spot for global exporters that are looking to China to help drive demand for factory machinery, iron ore and other goods. They suggest China's slowdown was moderating after growth fell from 11.9 percent in the first quarter of the year to 10.3 percent.

Export growth fell short of forecasts, and Lu said it reflected unexpectedly weak orders by foreign retailers for the peak Christmas selling season.

"That means the outlook is very grim," he said.

The trade surplus narrowed from July's 18-month high of $28.7 billion but was up 28 percent from a year earlier. It was well below most private sector forecasts, which ranged as high as $30 billion.

The U.S. Commerce Department in August declined to launch an investigation of the currency complaints despite requests by some lawmakers.

A Chinese foreign ministry spokeswoman rejected pressure over currency during a visit this week by Obama's top economic adviser, Lawrence Summers, saying Beijing will decide the pace of change.

"Did the authorities in Beijing think that the G-20 would fail to notice that the promised yuan revaluation has not happened?" said research firm High-Frequency Economics in a report this week.

Also this week, a major U.S. union filed a trade complaint asking the Obama administration to crack down on what it said was improper Chinese government aid to clean energy industries such as wind and solar power.

The United Steelworkers union said the Chinese aid violates global trade agreements and is hurting American workers.

The administration has 45 days to decide whether to accept the petition and launch an investigation that could lead to cases being filed against China before the Geneva-based World Trade Organization.

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Online:

General Administration of Customs of China (in Chinese): http://www.customs.gov.cn/

[Associated Press; By JOE McDONALD]

AP researcher Bonnie Cao in Beijing contributed.

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