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TRADE WARS
China reports surprisingly strong trade figures
by Staff Writers
Beijing (AFP) Dec 10, 2011

China trade surplus narrows to $14.5 bn: Dow Jones
Beijing (AFP) Dec 10, 2011 - China's politically sensitive trade surplus narrowed to $14.5 billion in November, Dow Jones newswires reported on Saturday, down from the $17 billion reported a month earlier.

The figure is a perennial point of contention for China's key trade partners, the United States and Europe, who argue that China's currency is grossly undervalued, giving its exporters unfair advantage.

China's exports rose 13.8 percent year-on-year -- up from $157.49 billion in October, Dow Jones reported.

November imports rose 22.1 percent year-on-year, up from the $140.46 billion recorded a month earlier.


The pace of Chinese export growth is slowing official data showed Saturday, but analysts say stronger than expected US demand helped narrow China's politically sensitive trade surplus in November.

The combined value of China's monthly exports and imports rose from October, the data showed, despite ongoing turmoil in the country's key markets of Europe and the United States, and Beijing's growing concern about economic growth.

Vice Premier Wang Qishan, China's top finance official, last month issued a dire warning that the global recession was here to stay and would impact the export-driven economy due to weakening external demand.

Yet China's trade surplus -- a bugbear for major trade partners who say its exports are cheap because its currency is undervalued -- narrowed to $14.5 billion in November from $17 billion in October, China's customs office said.

The surprisingly strong data came amid China's growing concerns over weakness in its vast manufacturing sector, which employs hundreds of millions of people and is a major driver of the world's second largest economy.

China's exports rose 13.8 percent year-on-year to $174.46 billion in November, up from $157.49 billion in October, the customs office said in a statement, and greater than the 10.4 percent expected by 16 economists polled by Dow Jones newswires.

Analysts said the unexpected strength in the monthly exports rise did not change the overall slowing trend.

"Exports are decelerating," IHS Global Insight economist Ren Xianfang told AFP. "If you compare with August, their growth is almost down 10 percentage points. It is a gradual deceleration."

The month-on-month growth came on the back of a rise in China's shipments to the United States, which rose to $30.94 billion in November from $28.60 billion the previous month.

Despite economic hardships in the West, the better than expected US demand appeared to be offsetting sluggish buying in Europe, now in a debt crisis, supporting the idea of an "overall soft landing of the Chinese economy".

"The US economy is doing much better than initially thought," Ren said. "If the US holds on, we don't think it will be as bad as 2009. It won't even be as bad as during the Asian financial crisis."

Meanwhile, exports to the European Union -- China's biggest trade partner -- were up to $30.98 billion in November from $28.74 billion in October, customs data showed.

Ren said China could expect exports to continue to grow in 2012, just at a slower rate, "on the border of 10 percent".

China's overall imports expanded by 22.1 percent to $159.94 billion in November, up from the $140.46 billion recorded a month earlier, outstripping a 19 percent rise expected in the market as reported by Dow Jones newswires.

Patrick Chovanec, a professor of business at Tsinghua University said he was surprised by rising imports of products such as iron ore and automobiles, both up in the low-double-digits in November following similar jumps in October.

"Look at the overcapacity in steel and the roughly 15 percent drop in steel production since June. I don't know where that iron ore is going. And everyone I talk to tells me the car market is flattening out," he said.

"What this reflects, really, is a volatility of expectations in the market. Two reports back to back will often show opposing trends. Predicting demand patterns in China is more art than science. It can be baffling," he said.

The robust trade data are in contrast with other official figures released on Friday that showed China's economy lost steam in November.

Consumer prices rose at their weakest pace in more than a year and factory output growth hit its lowest level in more than two years, fuelling pressure on Beijing to further relax credit restrictions to prevent a hard landing.

Analysts have said the weaker-than-expected data will raise concerns that economic woes in Europe and the United States are hurting China's economy and likely embolden policymakers to further open credit valves to spur activity.

China's economy is expected to grow 8.9 percent next year, which would be the slowest pace in more than a decade, the Chinese Academy of Social Sciences, a state-run think tank, said this week.

But the official Xinhua news agency said China's top leaders had decided at a meeting on Friday to maintain a "prudent monetary policy" in 2012, suggesting they will move cautiously to ease credit restrictions to spur more spending.

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China to adopt IMF reforms 'as appropriate': central bank
Beijing (AFP) Dec 10, 2011 - The head of China's central bank says the country will implement changes to its financial system suggested by the International Monetary Fund "as appropriate", the Washington-based lender said.

People's Bank of China (PBOC) governor Zhou Xiaochuan told a joint PBOC-IMF symposium held Friday and Saturday in Shanghai that international financial standards were "critical" to reducing risk, the IMF said in a statement.

"Rigorous implementation of international standards and codes is critical in reducing financial risk," Zhou said in his keynote address to Asian central bankers and regulators at the meeting.

Zhou was responding to the IMF's first Financial Sector Assessment Program (FSAP) in China, which last month called for sweeping reforms, blaming Beijing's "heavy" involvement in banks and financial watchdogs for slack market discipline and corporate governance.

In a list of 29 key recommendations on how Beijing can improve its financial system, the IMF urged policymakers to allow state-owned banks to make lending decisions based on commercial risk rather than government policy.

Zhou stopped short of saying the world's number two economy would adopt the IMF's suggestions wholly, including those that Beijing relax control of the yuan currency and allow the central bank more freedom in policy decisions.

"China will further strengthen its financial stability, regulatory and supervisory framework and promote financial reform and development by incorporating the findings of the China FSAP as appropriate," Zhou said.

China is one of 25 "systemically important countries" that has agreed to mandatory IMF evaluations at least once every five years, though Beijing has no obligation to implement the recommended reforms.

Rampant lending since the 2008 financial crisis has left many companies and local governments in China with huge debts, while a recent slowdown in economic growth and falling property prices have fuelled fears of a rise in defaults.

Min Zhu, the IMF's deputy managing director, said "the FSAP should continue to evolve, in response to the needs of member countries, including those in this region."



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