China trade surplus in surprise drop

Financial Times:

China’s trade surplus narrowed last month, with imports growing much faster than expected though not enough to defuse political pressure on Beijing over the level of its currency.

According to figures released on Friday, the trade surplus was $20.03bn in August, down from $28.7bn a month earlier and short of analysts forecasts. Exports grew 34.4 per cent in August over the year before while imports increased 35.2 per cent.

While the trade surplus was below expectations, analysts said it was still relatively large and was unlikely to pacify critics in the US who are pushing for legislation that accuses China of manipulating its currency. The largest American industrial labour union on Thursday filed a complaint with the US trade representative to call for an investigation into Beijing’s support for its renewable energy industry.

“China’s trade surplus remained high, above $20bn for three consecutive months, which continues to add pressures on China’s exchange rate,” said Liu Ligang, economist at ANZ in Hong Kong.

China abandoned its currency peg against the US dollar in late June. Since then, however, it has allowed only very modest currency appreciation, prompting renewed criticism from Washington.

“Frankly they haven’t let the currency move very much so far,” said Tim Geithner, US Treasury secretary, on Bloomberg Television this week. “They know they’re just at the beginning of that process and I think we’d like to see them move more quickly.”