China's trade surplus pobably doubled in March to $20b
(Bloomberg.com)Updated: 2007-04-09 10:51
China's trade surplus probably almost doubled in March, adding to friction that may prompt the US to file a World Trade Organization complaint as early as this week.
US lawmakers charge that China keeps its currency undervalued, protects piracy and subsidizes products sold overseas. The Commerce Department last month levied duties on coated paper imports from China and the government may file a WTO complaint over what it calls piracy of copyrighted movies and books, according to four people briefed by the Bush administration.
This "raises the specter of a future escalation of protectionist sentiment and action," said Paul Sheard, global chief economist at Lehman Brothers Holdings Inc. in New York.
US officials have prepared two separate trade cases against China, the people said. The people, three industry officials and one lawyer, spoke last week on the condition they not be named.
Imports, Exports
China's commerce ministry called the coated-paper tariffs "unacceptable" and said it reserved the right to take "necessary" action. The US trade deficit with China jumped to a record $232.5 billion last year.
China's exports probably gained 27.4 percent in March from a year earlier and imports likely climbed 20 percent, the Bloomberg News survey showed.
"It isn't easy for the US to back down during an election year especially when the trade deficit with China continues to soar," said Chris Leung, senior economist at DBS Bank Ltd. in Hong Kong.
The duties on China open a gateway for similar actions in industries such as steel and textiles. China is the world's largest exporter of steel and textiles account for 70 percent of the total trade surplus.
"It is in China's own interest, particularly in the coastal cities, to move quickly to close down subsidies and move out of those low value-added industries," said Stephen Green, senior economist at Standard Chartered Bank Plc. in Shanghai.
Reserves, Interest Rates
China's trade surplus has created problems at home by pumping cash into the economy, fueling inflation and investment in unneeded factories and real estate.
M2, the broadest measure of money supply in China, likely increased 17 percent in March from a year earlier, the Bloomberg News survey showed.
The government last week ordered banks to set aside more money as reserves for the sixth time in less than a year. Last month the central bank raised interest rates to an eight-year high.
The yuan rose last week, taking its gain to 7.2 percent since a decade-long peg to the US dollar was scrapped in July 2005.
Exchange Rate
China will improve the flexibility of the exchange rate this year and let market forces play a bigger role in deciding its value, assistant central bank Governor Yi Gang said April 6.
China has limited yuan gains because a faster appreciation could put companies out of business and result in job losses in the world's most populous country.
Zheng Zhiyi, chairman of the China Chemical Fibers Association, last month estimated the industry would lose 8.8 billion yuan worth of exports this year if the Chinese currency gained 5 percent.
The following tables show economists' estimates for percentage changes in China's exports, imports and money supply in March from a year earlier. Predictions for the trade surplus are in billions of US dollars.
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