China trade momentum softens in face of global woes

Thu Oct 13, 2011 1:17am EDT
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By Koh Gui Qing and Aileen Wang

BEIJING (Reuters) - China's trade surplus narrowed for a second straight month in September, as both imports and exports were lower than expected, reflecting global economic weakness and domestic cooling that will deepen policy quandaries facing Beijing.

The trade data on Thursday prompted the deputy chief of the country's customs administration to complain that a stronger yuan was hurting exports. Slower import growth could also raise pressure for fiscal loosening, despite inflationary pressures.

"The rise in renminbi exchange rate may limit the room for export growth," Lu Peijun, the deputy head of the Chinese customs administration, said at a news conference about the data. The renminbi is another name for the yuan.

"China is still facing relatively big imported inflationary pressure and trade conditions are also deteriorating," said Lu.

China's trade surplus of $14.5 billion in September was smaller than August's $17.8 billion and less than half of the $31.5 billion recorded in July. Exports to the troubled European Union fell to their lowest value since June.

"It is now certain that external demand is falling. Chinese export growth will continue to slow in the rest of the year," said Shi Lei, an analyst for Pingan Securities in Beijing, who said the figures were unlikely to prompt swift policy shifts.

"As falling external demand is expected by Chinese policymakers, any broad-based loosening of the monetary policy is unlikely in the short term until we see a clear fall in inflation," said Shi. "The window for possible policy easing is around November and December."

Both imports and exports were weaker than forecast by economists in a Reuters poll and several analysts said no rebound is in sight.   Continued...