China’s trade surplus for October probably easily set a new record high, underscoring the strength of its export machine and potentially handing further ammunition to US and European critics of Beijing’s trade policies.
The median forecast of 18 economists polled by Reuters was for a surplus of $30 billion, beating the previous record of $26.9 billion set in June this year and roughly 26% greater than the October 2006 surplus of $23.8 billion.
Annual export growth probably slowed a touch to 22.4% in October, while import growth picked up to 20.0%, the poll showed.
“The last months of the year are usually the busy season for exporters,” said Chen Jijun, an analyst with CITIC Securities in Beijing. “Exports will be strong in October and the trade surplus will be big.”
Should the forecast prove accurate, the surplus for the first 10 months would reach $215.7 billion—compared with $177 billion in all of 2006.
“It’s possible for China to record a 2007 trade surplus of over $260 billion,” Chen said.
Faced with a wall of liquidity entering the economy as a result of the surplus, Beijing has cut value-added tax rebates on energy-intensive or polluting products that it wants to discourage firms from making for export.
Rob Subbaraman and Mingchun Sun, economists with Lehman Brothers in Hong Kong, said that while they expect the surplus to hit $29.5 billion in October, that would still represent a slowdown in exports and an acceleration in imports.
“There have been many signs recently that exporters are feeling the pinch of currency appreciation and policies to curb export growth,” they said in a note to clients, citing secondary indicators like a central bank survey of entrepreneurs.
“We judge this is only the beginning, and we expect continued slowdown in China’s export growth.”
Such a trend would probably be welcomed by Beijing.
In a signal of authorities’ continued nervousness about the gaping surplus, the South China Morning Post cited an executive with the Federation of Hong Kong Industries as saying that authorities could further cut or abolish export tax rebates on as many as 2,000 more products sometime soon. (Reuters)