China's Trade Surplus Still Growing

Sydney, Feb 18, 2008 (ABN Newswire) - According to some economists, it was the calm before the confusion: China's January trade figures will be the last clear indication of the country's economic performance for the next couple of months after the terrible snowstorms and cold weather of the last three weeks.

The figures revealed the highest January surplus ever. January is a month when exports usually slow and the surplus is smaller because of the surge in shipments in the proceeding three months for the Western Christmas shopping season.

It was the second indication in two days that the Asian economies are doing well compared to the sluggish US and European economies.

Japan, the world's second-largest economy, reported an acceleration in fourth-quarter growth late last week.

Helping boost Chinese exports in the month was a rush to push products overseas before the Lunar New Year slowdown last week, which sees China come to a halt for at least a week.

But adding to the slowdown this year were the big snowstorms which stopped industry early, curtailed energy supplies and stopped millions of people from travelling. That will all have a distorting effect on growth and inflation for February and the first quarter.

The bad weather dampened activity in trade, boosted world prices for a host of commodities, such as copper, lead and zinc, not to mention contributed to rises in coal, wheat, cooking oils, oil and some foodstuffs.

Poor transport, blocked supplies, low or non existent energy and a string of factory closures will confuse readings from China's economic barometer for the next couple of months.

That's why the January trade figures should not be taken as indicating anything that the country's economy is still ticking over nicely, even if there are a couple of indicators suggesting that activity might be slowing.

China's Customs Bureau said Friday that the trade surplus jumped more sharply than expected in January, when compared to January 2007.

The surplus grew 23% from January a year earlier to $US19.5 billion.

Bloomberg said that was higher than the $US17 billion median estimate in a survey last week.

Exports hit a six month peak, despite higher export taxes and a rising Yuan which failed to restrain growth.
Economists said the figures, although early, indicate China should turn in another 1q0% plus year in 2008.

Exports jumped 26.7% to $US109.7 billion but imports increased slightly faster: up. 27.6% to $US90.2 billion.

That was the largest rise almost two years and another sign, seen in the final quarter of last year, of strong growth in imports. That's something the Government is encouraging to try and relieve tensions with the US and Europe over the value of the Yuan.

The Yuan has risen 1.5% so far this year against the US dollar after rising 7% in 2007.

That should be starting to slow the cost of exports (Not really) and boosting imports (Yes it is). It rose 0.1% Friday to 7.1825 to the US dollar, the highest since a fixed exchange rate ended in July 2005.

Because of the bad weather, the Lunar New Year and the rush to export in January, February will be a very low month, abnormally so and no one should take any notice of the headline figures.

Exports of machinery and electronics rose 28% in January from a year earlier to $US62.2 billion and accounted for 57% percent of shipments.

The surplus was less than December's $22.7 billion because fourth-quarter export volumes are boosted by those Christmas shipments. The 2007 trade gap rose 48%, compared to 2006, to a record $US262 billion.


 

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