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China's trade surplus soars 85.5 percent to record in June

AFP | July 10 2007

China's trade surplus expanded by 85.5 percent in June to hit an all-time monthly record of 26.91 billion dollars, official data showed Tuesday, as exporters rushed to beat new curbs.

Exports for June totalled 103.27 billion dollars and imports were 76.36 billion dollars, the customs administration said in a statement on its website.

China posted a trade surplus of 112.53 billion dollars in the first six months of 2007, as exports hit 546.73 billion dollars and imports reached 434.2 billion dollars, it said, without giving comparative data.

But based on previously released figures, the June surplus was 85.5 percent higher than the same month last year and the six-month figure was 83.1 percent larger than the corresponding period in 2006.

The June surplus far exceeded the previous monthly record high of 23.83 billion dollars set in October last year.

A senior analyst at the customs administration had said last week that one of the reasons for the then anticipated June rise was that manufacturers had rushed to ship orders before the end on July 1 of export tax rebates.

Ping An Securities analyst Sun Fanghong agreed that the push to get goods out of the door before the rebate deadline had played a significant role in further widening China's contentious trade gap.

"Exporters are rushing to export," said Sun.

The government announced on June 19 that it would cut or remove export tax rebates for 2,831 commodities, or a third of total exports, from the beginning of this month in another effort to bring some balance to the trade account.

The move came after China imposed extra export tariffs and slashed import duties as of June 1, which led to a similar export boom and lifted May's trade surplus by 73 percent to 22.45 billion dollars, then the third-highest ever.

But Robert Subbaraman, Lehman Brothers analyst in Hong Kong, said the widening surplus was also due to falling imports.

"The composition surprised us -- export growth was not as strong as we had expected. Part of the reason for that record trade surplus is because import growth was weaker than it has been in recent months.

"In the past, it has been very strong in exports. The difference this time is imports which have weakened in terms of the growth rate."

China's huge trade surplus, which soared 74.2 percent to 177.5 billion dollars last year, has been a constant source of friction with its major trading partners, mainly the United States and the European Union.

Beijing has been routinely accused of keeping the Chinese currency artificially low to make its goods cheaper, giving its exporters an unfair competitive edge.

Last month China escaped being branded a currency manipulator in a US Treasury report -- if it had been so accused, then the Asia giant would have become subject to a legal process that can trigger sanctions under US law.

US lawmakers critical of China's trade and foreign exchange policies have unveiled legislation that could make it easier to impose sanctions on Beijing.

Ping An Securities' Sun said the larger surplus would again pressure the currency but was unlikely to affect Beijing's stated policy of maintaining the stable rise of the Chinese yuan.

"The surplus absolutely will impact the yuan's appreciation but I don’t think the Chinese government will change its slow and steady pace (of adjustment) easily," she said.

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