China trade surplus hits record near $11.8 billion

China's trade surplus hit a record in October of about $11.8 billion, up from $7.1 billion a year earlier and rebounding much more strongly than expected from a September dip, partial data released on Thursday showed.
The figures came out a day after President George W. Bush described the US trade deficit with China as bothersome and said he would urge China to make more progress towards a market-driven exchange rate.
The estimated surplus dwarfed expectations of a $9.0 billion figure and takes the accumulated total for the first 10 months to about $80 billion, up from $32 billion for the whole of 2004.
The United States accounts for about a quarter of the surplus, which had unexpectedly dropped in September to $7.6 billion from $10 billion in August.
Reuters calculated the surplus based on figures issued by the ministry on trade in electrical and machinery, which it said accounted for 55.2 percent of China's total exports in the first 10 months and 52.3 percent of imports.
Exports of those goods came to $339.2 billion between January and October, while imports totalled $279.5 billion.
That put total exports over the period at $614.5 billion and imports at $534.4 billion.
Comparing those figures with September's data, October exports came to about $68 billion and imports to about $56 billion, producing a monthly trade surplus of about $11.8 billion after rounding.
Qu Hongbin, an economist with HSBC in Hong Kong, said the figures were likely to increase pressure for a further rise in the yuan following July's 2.1 percent revaluation and China's adoption of a tightly managed float for the currency.
"How Chinese exports perform is largely driven by external demand rather than the exchange rate. But if you have a big trade surplus, it will give Western politicians an excuse or tool for them to put pressure on the currency," Qu said.
Gao Shanwen, chief economist with China Everbright Securities in Shanghai, expects the surplus to keep increasing, due in part to excess capacity that is forcing firms to seek new overseas outlets for their production. He said the surplus in 2006 could reach $120 billion.
"It will definitely fuel pressure on the renminbi exchange rate," Gao said. "But my own perception is that the surging trade surplus reflects the economic cycle, because overcapacity is expanding very sharply, rather than the exchange rate itself."