China's trade surplus probably widened in April,
adding fuel to demands from some U.S. politicians and businesses for faster
appreciation of the yuan before policy makers of the two nations meet this
The gap climbed to US$15 billion from US$10.4 billion in
April last year and from US$6.9 billion in March, according to the median
estimate of 18 economists surveyed by Bloomberg News.
That would bring the surplus for the first four months to US$61.4 billion, up
82 percent from the same period last year. The official figures will be released
as early as Thursday.
US Treasury Secretary Henry Paulson is fending off U.S. lawmakers' calls for
China to be sanctioned for alleged copyright piracy and keeping its currency
weak to help exporters. Paulson has called for "tangible results"at a meeting of
the Strategic Economic Dialogue with Chinese Vice Premier Wu Yi in Washington
"The U.S. Congress seems more determined than ever to tighten the noose on
China,"wrote Stephen Roach, chief economist at Morgan Stanley, in a May 4 note.
"The issue is trade policy and the legislative response to America's outsized
bilateral trade deficit with China."
Exports probably rose 22.5 percent in April from a year earlier and imports
gained 18.5 percent, the Bloomberg News survey showed.
In the first quarter, shipments to the U.S. rose 20.4 percent to US$50.7
China's currency has risen 7.6 percent since July 2005 when the government
ended a peg against the dollar and allowed the yuan to fluctuate by as much as
0.3 percent a day.
The gain failed to mollify some in U.S. businesses, who blame China for job
losses in U.S. manufacturing.
"The necessary appreciation of China's currency hasn't occurred."said Michael
Campbell, chairman of the National Association of Manufacturers' U.S.-China
Business Relations Task Force on May 8. "Patience is growing thin not just on
Capitol Hill but on the shop floors of American manufacturing plants."
The causes of the U.S. trade gap with China are more complex than the Chinese
government's efforts to restrain the yuan's value, according to Paulson.
"I'm focused on increasing exports and reducing barriers and increasing
competition in China and structural reform in China and seeing some signposts
along the way,"Paulson said in a May 2 speech. "Then we will get to the
China may allow the yuan trading band to widen to allow faster currency
appreciation, according to Jan Lambregts, head of research at Rabobank
International in Hong Kong.
Currency Trading Band
"China will do enough not to make the situation more sour,"said Lambregts.
"It will probably widen the yuan trading band. It doesn't cost much but is a
good gesture of flexibility."
China last month eased import rules for 338 products including plastics,
machinery and electronics. The government has also cut export rebates on steel
and introduced licenses to sell the metal abroad.
China's reluctance to let the yuan rise faster is because a stronger currency
would hurt company profits and jobs. The textile industry, which accounts for 72
percent of China's trade surplus last year, loses 8.2 billion yuan of profits
for every percentage point in the currency appreciation, China National Textile
and Apparel Council estimates.
"From the employment point of view, China doesn't want to kill the
exports,"said Chen Xingdong, an economist at BNP Paribas SA in Beijing. "But
building up huge foreign reserves is not in China's own interest. It is quite a
dilemma situation really."
China's foreign reserves grew US$1 million a minute in the first quarter,
double the average pace of the past year, and reached US$1.2 trillion at the end