India's trade deficit with China continued to rise over the first four months of this year, on the back of a record increase in Chinese exports which took the country's overall trade surplus to a higher than expected $11.4 billion in April.
Figures released on Tuesday by China's General Administration of Customs (GAC) showed India's trade with China touched $23.58 billion at the end of April, a 20.2 per cent year-on-year increase. Bilateral trade was driven by a 26.2 per cent increase in Indian imports, mainly of machinery and heavy equipment, which amounted to $14.5 billion. Indian exports to China were up 11.7 per cent in April from a year earlier, a rise attributed by officials to the resumption of iron ore exports following recent ban and a sharp increase in exports of yarn.
April saw a less than expected rise in Chinese imports across the board, resulting in the growth of China's trade surpluses with a number of countries, including India. While China's exports were up 29.9 per cent, imports grew 21.8 per cent. Tuesday's figures divided opinion among analysts here. Some attributed the lower-than-expected imports to a rise in commodity prices. For instance, China's imports of iron ore — India's biggest export to the country — fell 15 per cent from March. Others, however, expressed concern that the suprisingly low import figures reflected a general slowing down in the Chinese economy and the effects of rising inflation.
The unexpectedly quick rebound in China's trade surplus, up from only $140 million in March and a $7.3 billion deficit in February, the country's first in almost a year, is likely to strengthen calls for an appreciation in China's currency. The valuation of the yuan is at the focus of this week's Strategic and Economic Dialogue between China and the United States in Washington, where U.S. officials have reiterated calls for China to appreciate its currency, which, they say, has been kept undervalued to support exports.
However, there appears little likelihood of a significant appreciation, amid differences in opinion among different sections of the Chinese government. While the People's Bank of China and some officials have called for an appreciation as a means to boost domestic consumption and tackle rising inflation, which reached a 32-month high of 5.4 per cent in March, the Ministry of Commerce and the vast export industry have opposed any rise.
This stalemate was hinted at by Chinese Vice Premier Wang Qishan in an interview in Washington on Tuesday.