China says June trade surplus $21.3B

China's trade surplus fell 20 percent in June as export growth plunged, the government said Thursday, and analysts said Beijing might try to help struggling exporters by slowing the rise of its currency in defiance of pressure from trading partners.

The June trade gap was still China's biggest so far this year at $21.3 billion, the General Administration of Customs reported. Exports totaled $121.5 billion, up 18.2 percent compared with June 2007 — a sharp drop from May's 28 percent growth rate, according to the agency. Imports surged 23.7 percent to $100.1 billion.

Weaker export growth reflects slowing demand for Chinese goods amid slower global growth and fears of a possible U.S. recession, while China's robust economy and consumer spending are driving stronger imports.

The slowdown will increase pressure on the central bank to slow the rise of China's currency, the yuan, which has made exports more expensive in dollar terms, Standard Chartered economist Stephen Green said in a report to clients.

Currency appreciation "will slow significantly" in the second half of the year, after the yuan rose at an annualized rate of 12 percent against the dollar in the first half, said Mingchun Sun of Lehman Brothers.

Beijing has allowed the gradual rise of the yuan against the dollar to quicken in recent months, possibly to help cool inflation that is near 12-year highs. A stronger currency would help slow the flood of export revenues pouring into China's economy and pressuring prices to rise. But a too-rapid slowdown could hurt exporters and threaten thousands of jobs — an important political concern for Chinese leaders.

Beijing is under pressure from Washington and other trading partners that say the yuan is kept intentionally undervalued, giving Chinese exporters an unfair price advantage and adding to the country's trade surplus.

"The worries over the export sector get worse," Green said. He said it is "almost certain now" that Beijing will increase rebates of value-added taxes, or VAT, to help exporters.

China's trade surplus with the United States in June grew just 5 percent over the year-earlier month to $14.7 billion, according to customs data.

The surplus with the European Union, which has replaced the United States as China's biggest export market, grew 21.2 percent to $13.2 billion. That reflected stronger European economic growth and a decline in China's currency, the yuan, against the euro, which has made Chinese goods cheaper for European consumers.

The global surplus in June was China's biggest since December's surplus of $22.7 billion.

"Given that household consumption and infrastructure development are both on the rise, China will maintain a massive appetite for overseas resources," said Sherman Chan, an economist for Moody's Economy.com, in a report to clients. "Import growth will outpace export growth by far this year."

___

On the Net:

General Administration of Customs of China (in Chinese): http://www.customs.gov.cn