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China Trade Surplus Climbs To Record As Imports Drop On Oil
Perspective | 11 December 2014

China’s trade surplus climbed to a record in November after an unexpected decline in imports on lower crude oil and other commodity prices.

Overseas shipments rose 4.7 percent from a year earlier, missing the 8 percent median estimate in a Bloomberg News survey. Imports fell 6.7 percent, compared with projections of a 3.8 percent increase, leaving a trade surplus of US$54.5 billion, the customs administration said on 8 December.

The slide in oil prices to five-year lows offers China a double benefit as its leadership confronts the weakest expansion in a generation. The decline could boost economic growth and help keep inflation slow enough to give scope for further easing after November’s interest-rate cut.

“High trade surplus will be here to stay for several months on falling oil prices,” said Lu Ting, Bank of America Corporation’s head of Greater China economics in Hong Kong.

The Chinese government will hold its annual central economic work meeting from 9 December, China National Radio reported on 8 December. In the week ended 7 December, the ruling Politburo said it will maintain a prudent monetary stance and keep growth within a reasonable range in 2015. In November, the People’s Bank of China lowered lending and saving rates for the first time in two years and increased the ceiling for deposit rates.

China imported US$16.4 billion worth of crude oil in November, down from US$18.4 billion a year earlier.

Falling oil prices will prompt importers to “wait until the oil gets even cheaper and delay purchase,” and that also exacerbates the imports data, said Larry Hu, head of China economics at Macquarie Securities in Hong Kong.

Export Pressure
China’s General Administration of Customs expects exports growth to face “certain” pressure at end-2014 to early 2015, according to a statement on the website on 8 December.

China’s exports to the US grew 2.6 percent from a year earlier, down from October’s 10.9 percent gain, while shipments to the European Union rose 4.1 percent, the same as October.

In the week ended 7 December, US data highlighted a pickup in the world’s biggest economy, as a Labour Department report showed employers added 321,000 jobs to payrolls in November, the most since January 2012. Euro-area investment fell for a second quarter, holding back growth and underlining weakness in the economy that prompted the European Central Bank to cut its forecasts. Japan’s recession was deeper than initially estimated as company investment unexpectedly shrank, data showed on 8 December.

“The US economy is stable, but Europe and Japan are pretty weak, so the global economy is unlikely to support China’s growth,” Macquarie’s Hu said.

Fake Invoicing
China may set an economic growth target of 7 percent to 7.2 percent for 2015, National Business Daily cited Pan Jiancheng, vice head of the China Economic Monitoring and Analysis Centre of the National Bureau of Statistics, as saying.

Economists at institutions including Bank of America, Macquarie and Capital Economics said that weaker export growth may be a result of the government’s crackdown on fake invoicing, which is used to evade controls on the flow of capital into the mainland. Shipments to Hong Kong grew 1 percent from a year earlier in November, compared with surges of 24 percent and 34 percent in October and September.

The record trade surplus will pose “fundamental pressures” on the Chinese yuan toward appreciation against the US dollar, Louis Kuijs, Royal Bank of Scotland Group’s chief Greater China economist in Hong Kong, said in an e-mail.

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