Analysis: China's trade surplus fades but imbalances persist

Tue Jan 10, 2012 2:22pm EST
 
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By Alan Wheatley, Global Economics Correspondent

LONDON (Reuters) - One of the biggest imbalances in the global economy could soon be a thing of the past: China's super-sized trade surplus is melting away.

But don't get too excited.

In light of the "savings glut" theory that China's export of its excess savings helped to drive down interest rates in the West and fuel over-consumption, especially in the United States, the fast-falling surplus should help to put the world economy on a steadier footing.

"This supports our view that global rebalancing is occurring amid weakening developed market growth and robust Chinese demand," economists at Barclays Capital in Hong Kong said in a report.

They were commenting on figures released on Tuesday showing that the surplus shrank to $155 billion last year from $183 billion in 2010.

As a share of gross domestic product, the surplus shriveled to 2.1 percent in 2011 from 3.1 percent in 2010 and a high of 7.3 percent in 2007.

For 2012, Jacqueline Rong at BNP Paribas in Beijing expects the surplus to drop further to 1.2 percent of GDP. In dollar terms, Daiwa Securities has penciled in a surplus this year of $118 billion and Mizuho is forecasting $113 billion.

Ting Lu at Bank of America Merrill Lynch in Hong Kong reckons the 2012 surplus could be as low as $41 billion -- a rounding error next to the record high of $296 billion in 2008 that triggered demands from Washington that Beijing let the yuan rise faster or risk the wrath of Congress.   Continued...