China's October Trade Surplus Soars; Critics Say Yuan Is Undervalued
Beijing (AP) - China's trade surplus surged to its second-highest level this year in October, adding to pressure on Beijing to ease currency controls as leaders of major rich and developing economies gather for a Group of 20 summit.
Exports rose 22.9 percent over a year, while imports rose 25.3 percent, figures showed Wednesday. The $27.1 billion surplus was up sharply over September's $16.9 billion and was just behind the year's high in July of $28.7 billion.
Beijing could face demands at the G-20 meeting Thursday and Friday in Seoul, the South Korean capital, to ease controls that Washington and other trading partners say keep its yuan undervalued, swelling its trade surplus and costing jobs abroad.
"Big trade surpluses are ammunition for China's critics. A big surplus suggests the yuan is undervalued," said Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates.
Governments hope to make progress in Seoul toward reducing global imbalances -- the decades-old pattern of the United States running large trade deficits while exporters such as China, Germany and Japan accumulate surpluses. Britain's Treasury chief, George Osborne, called on Beijing this week to "play a leading role" in the effort.
In Seoul, a Chinese envoy to the G20 meeting said the yuan should not be a focus of the gathering.
"The recent crisis was certainly not caused by China's currency," said Cui Tiankai, a deputy Chinese foreign minister. He said leaders "are not coming to Seoul for confrontation" and should address "structural problems in the global economy."
Beijing promised more exchange rate flexibility in June but the yuan has risen by only a few percent against the dollar since then, much less than critics want. U.S. business groups say the yuan is undervalued by up to 40 percent.
Some American lawmakers are pressing for punitive tariffs on Chinese goods if Beijing fails to act. The U.S. House of Representatives passed legislation in September to allow Washington to sanction governments that manipulate their currency for trade advantage, and the Senate is due to take up the measure.
October exports rose to $135.9 billion, though the growth rate fell from September's 25.1 percent, the fifth month of decline as global demand weakens.
Imports were $108.8 billion and growth rose from September's 24.1 percent rate, defying expectations of a slowdown after China's economic expansion cooled to 9.6 percent in the three months ending September from 10.3 percent the previous quarter.
Details on trade with the United States and Europe were not immediately released. The United States says its trade deficit with China rose to a new monthly high of $28 billion in September.
China's import growth is expected to decline as its economic expansion cools, hurting demand for iron ore, factory machinery and other goods from the United States, Europe, Australia and elsewhere that are counting on relatively robust Chinese growth to help power their recovery from the global slump.
Growth eased to 9.6 percent in the three months ending in September from 10.6 percent the previous quarter as Beijing clamped down on lending and investment. The World Bank says growth should fall further next year to 8.7 percent.
The ruling Communist Party's latest five-year economic plan, drafted in October, calls for reducing reliance on exports by promoting domestic consumption, which would boost imports and narrow the trade surplus.
But without major changes, China's trade gap should widen steadily over the coming year, the World Bank and private sector analysts say. UBS is forecasting a $200 billion surplus this year and $220 billion in 2011.
Reducing such huge imbalances requires cooperation between governments and will take time, said Paul Volcker, a top economic adviser to President Barack Obama.
"There's a considerable challenge in the emerging world of too much dependence on exports, too little dependence on its own domestic demand," said Volcker, chairman of Obama's Economic Recovery Advisory Board, at a financial forum in Beijing on Tuesday.
"None of those things can be changed by waving a wand," he said. "But it's important that we have some sense of progress in the right direction."
Associated Press writers Foster Klug in Seoul and Chi-chi Zhang in Beijing contributed.