China’s trade surplus surged to its second—highest level this year in October, adding to pressure on Beijing to ease currency controls as leaders of the major rich and developing nations gather for a Group of 20 summit.
Exports rose 22.9 percent over a year ago despite fears the global recovery might be weakening, while imports rose 25.3 percent even as China’s rapid expansion eased, figures showed Wednesday. The $27.1 billion surplus was up sharply over September’s $16.9 billion and was just behind the year’s high in July of $28.7 billion.
The surge adds to pressure for Beijing at the G—20 meeting on Thursday and Friday in South Korea’s capital Seoul to ease currency controls that Washington and other trading partners say keep China’s currency undervalued, swelling its trade surplus and costing jobs abroad.
Governments hope to make progress toward reducing so called imbalances, namely the decades old pattern of the U.S. buying exports from the rest of the world and running huge trade deficits while countries such as China, Germany and Japan accumulate massive surpluses
“I hope that China will seize the opportunity to play a leading role in this,” said Britain’s Treasury chief, George Osborne, during a visit to Beijing on Tuesday.
Some American lawmakers are pressing for punitive tariffs on Chinese goods if Beijing fails to act. The U.S. House of Representatives passed legislation in September to allow Washington to sanction governments that manipulate their currency for trade advantage, and the Senate is due to take up the measure.
Still, Beijing is likely to reject demands in Seoul for concessions, said Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates.
“I don’t think they’re in any mood to take any lessons from the U.S. on how they should organize their economy,” he said. “So even if they come in for criticism at the G20, I think they’re going to be pretty robust in their defence of how they are organizing things.”
Critics say China’s currency controls keep its yuan undervalued by up to 40 percent against the U.S. dollar, giving its exporters an unfair price advantage. Beijing promised more exchange rate flexibility in June but the yuan has risen by only a few percent since then, much less than critics want.
In a possible preview of Beijing’s position in Seoul, the head of a government bank on Wednesday rejected suggestions the yuan is undervalued. He said a rapid rise in the yuan would cause massive job losses and Western nations would have to be ready to accept millions of Chinese immigrants.
“If you are not ready, then please don’t pressure China to appreciate its currency, because it cannot solve the issues faced by the West,” said Li Ruogu, chairman of the Import—Export Bank of China, speaking at a conference in Beijing.
October exports rose to $135.9 billion, though growth fell from September’s 25.1 percent rate, the fifth month of decline as global demand weakens.
Imports were $108.8 billion and growth increased from September’s 24.1 percent, defying expectations of a slowdown after China’s economic expansion cooled to 9.6 percent in the three months ending September from 10.3 percent the previous quarter.
Details on trade with the United States and Europe were not immediately released. The United States says its trade deficit with China rose to a new high of $28 billion in September.
China’s import growth is expected to decline as the economic expansion cools, hurting demand for iron ore, factory machinery and other goods from the United States, Europe, Australia and elsewhere that are counting on relatively robust Chinese growth to help power their recovery from the global slump.
“China has done surprisingly well in tapping new sources of export growth this year but the trend is clearly downward,” said Mr. Orlik. Investment growth also is fading, he noted, and “with consumers not buying large quantities of consumer goods, imports will fade away.”
China’s economic expansion eased to 9.6 percent in the three months ending in September from 10.6 percent the previous quarter as Beijing clamped down on lending and investment curbs to guide growth to a more manageable level. The World Bank says growth should fall further next year to 8.7 percent.
The ruling Communist Party’s latest five—year economic plan, drafted in October, calls for reducing reliance on exports by promoting domestic consumption, which would boost imports and narrow the trade surplus.
But without major policy changes, China’s trade gap should widen steadily over the coming year, the World Bank and private sector analysts say. UBS is forecasting a $200 billion surplus this year and $220 billion in 2011.
Reducing such huge imbalances requires cooperation between governments and will be a long process, said Paul Volcker, a top economic adviser to President Barack Obama, at a financial forum in Beijing on Tuesday.
“There’s a considerable challenge in the emerging world of too much dependence on exports, too little dependence on its own domestic demand,” said Volcker, chairman of Obama’s Economic Recovery Advisory Board.
“None of those things can be changed by waving a wand,” he said. “But it’s important that we have some sense of progress in the right direction.”