China exports surge renews yuan debate

Many analysts believe the export momentum will soon wane, but for now the latest numbers give ammunition to critics who say Beijing is holding down the value of its yuan currency to gain an unfair trading advantage.

Chinese exports in June rose 43.9 per cent from a year earlier, beating forecasts of a 38 per cent rise, the customs administration said yesterday. Imports rose 34.1 per cent year on year, in line with projections.

That left China with a trade surplus of $20 billion (13bn), its largest in nine months. The market had expected a surplus of $13.8bn.

Liu Nenghua, an economist with Bank of Communications in Shanghai, said: "Exports were better than expected because the negative impact from the European debt crisis was not as serious as the market had feared. Growth in China's exports will slow down in coming months, that's for sure. But there will be no sharp drop."

The strong trade numbers could help ease fears - for a time, at least - about the potential for a skid in the Chinese economy after an official campaign to clamp down on the red-hot property market.

They could also lead to fresh calls for Beijing to let the yuan rise more quickly. China detached its currency from the dollar on 19 June, having kept it locked in place for 23 months to help exporters ride out the global economic turmoil.

The yuan has gained just 0.78 per cent against the dollar since then, and pressure is again building on US president Barack Obama to take a stronger line against Beijing. Critics say an undervalued exchange rate is an artificial boost for Chinese exporters, robbing other countries of jobs and growth.

As if anticipating this criticism, Zheng Yuesheng, statistics chief for the customs bureau, noted China's trade surplus in the first half of 2010 was about 40 per cent less than in the same period last year.

"Our foreign trade has continued to move toward a roughly balanced direction," he said.