China's global trade surplus narrowed in 2010 for the second straight year, giving Beijing grounds to rebuff US pressure for faster currency appreciation ahead of a visit to Washington next week by President Hu Jintao. The Chinese government can point to a 6 percent fall in its trade surplus last year to $183 billion as the latest evidence it is making steady progress in rebalancing its economy toward domestic consumption, cutting reliance on exports and giving the world a lift through surging demand for imports.
For Washington, however, this may be happening too slowly. Lawmakers will find little comfort in the data showing that apart from some heavy machinery and agricultural commodities, the United States provides few of the goods fuelling China's import growth. The mismatch meant the politically sensitive trade gap between the world's two biggest economies widened by 26 percent in 2010 to $181 billion, providing fodder for critics of Beijing's tightly controlled currency regime.
The overall trade data from December alone was consistent with the pattern since the outbreak of the global financial crisis more than two years ago. With China growing much faster than the rest of the world, imports outshone exports. "Imports are much stronger than we have expected, indicating that domestic investment and internal demand are mainly pushing up domestic consumption," said Wang Han, an economist at advisory firm CEBM in Shanghai.
China's December exports rose 17.9 percent from a year earlier and imports increased by 25.6 percent, the customs agency said on Monday. That left the country with a trade surplus in December of $13.1 billion, well below analysts' expectations of $20 billion and the lowest in eight months.
A smaller trade surplus means that less money is flowing into China, making it less urgent for the central bank to mop up the excess cash in the economy that has pushed prices higher. China's full-year trade surplus was 38 percent lower than its pre-crisis peak of nearly $300 billion in 2008. "This could reduce the pressure for yuan appreciation and also remove some pressure for the central bank to imminently launch aggressive tightening," said Wang Hu, an economist with Guotai Junan Securities. Along with quickening the pace of yuan gains, the government raised interest rates twice and banks' required reserves six times last year to rein in inflation that reached a 28-month high in November of 5.1 percent.