China says surplus in trade falls

Report for March comes as nation criticizes 2 U.S. piracy complaints

April 11, 2007|By Don Lee | Don Lee,Los Angeles Times

SHANGHAI, China -- China's export juggernaut slowed sharply in March, but analysts doubted that the surprising results would ease mounting trade tensions with the United States.

China reported yesterday that its trade surplus with the rest of the world came in at $6.9 billion last month, about a third of most analysts' forecasts. The nation's exports rose 6.9 percent in March over a year earlier - the lowest growth rate in five years - as imports grew 14.5 percent.

The report by China's customs administration was issued about 12 hours after the Bush administration ratcheted up pressure on Beijing by announcing that it would file two complaints with the World Trade Organization over counterfeiting of U.S. intellectual property and alleged trade barriers involving media and books. The United States recorded a $232 billion trade deficit with China last year.

China's government expressed "great regret and strong dissatisfaction" at the U.S. move.

"The decision runs contrary to the consensus between the leaders of the two nations about strengthening bilateral trade ties and properly solving trade disputes," said Wang Xinpei, a Ministry of Commerce spokesman.

"It will seriously undermine the cooperative relations the two nations have established in the field and will adversely affect bilateral trade," Wang said.

Chinese officials, pointing to the March data, said China's overall balance of trade would gradually improve. But analysts widely agreed that last month's figures were an anomaly, after the unusual burst of exports in the previous two months or because of statistical aberrations.

Even with the March slowdown, China's trade surplus with the world totaled $46.5 billion in the first quarter - twice that of the first quarter of last year. China's exports in the January-March period surged by 28 percent from a year earlier, and imports increased by 18 percent. Analysts don't see a big change in this trend in the coming months.

China's first-quarter trade surplus with the U.S. stood at $34.7 billion, according to China customs' data.

The March report "will do nothing, zilch, nada, to address political concerns in the U.S. about China's overall trade surplus," said Stephen Green, senior economist at Standard Chartered Bank in Shanghai.

In the face of intensified criticisms from the U.S. and Europe, which also is running a large trade deficit with China, Beijing has taken some steps to cool the pace of exports and bolster imports. Chinese officials have imposed measures aimed at slowing down lending for new factories in certain industries, while lifting import controls on commodity products and pledging to introduce policies to boost high-technology and machinery imports.

But nobody expects a swift change, given the size and momentum of China's economy, now the world's fourth-largest.

The central government has been reluctant to impose measures, such as abolishing tax rebates for garment exports, that could hurt major industries providing livelihoods for millions. And local officials have turned a blind eye to rampant building of factories churning out steel and iron that boost economic development and government revenues.

In the first quarter, Chinese exports of raw steel and steel products surged about 150 percent from a year earlier, to almost $10 billion, customs data show. Shipments of computers and other data-processing equipment jumped 43 percent to $28.3 billion. Garment exports rose 18 percent to $20.2 billion. The biggest gains in imports were raw materials, such as copper, iron ore and plastics.

Until recently, the Bush administration had taken a softer approach to bring down the deficit with China, prodding the Chinese to loosen control of the currency, which many believe is undervalued and gives Chinese exporters an unfair advantage. But in February, the administration filed a WTO case over China's alleged illegal government subsidies and last month threatened to seek higher tariffs on certain Chinese imports.

Next month, a Chinese delegation will come to Washington for another round of the "strategic economic dialogue" started by Treasury Secretary Henry M. Paulson Jr. In a goodwill gesture, Wu Yi, China's vice premier and head of the Chinese team, is expected to announce a major purchase of U.S. goods.

Don Lee writes for the Los Angeles Times.

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