China stormed back to post a hefty trade surplus in April as exports hit a record while imports eased more than expected, weighed down by sustained monetary tightening and high commodity prices.
The surplus of $11.4 billion, nearly four times greater than expected, followed a small, rare trade deficit in the first quarter and could reignite criticism of Beijing's policy of limiting currency appreciation.
Exports were slightly stronger than anticipated, growing 29.9 percent in April from a year earlier to $155.7 billion. Imports climbed at a lackluster 21.8 percent, well short of estimates. Analysts were at loggerheads over whether this should be read as a sign of surprising weakness in the Chinese economy or simply deferred purchases because of soaring commodity bills.
"Exports are much stronger, that's the basic thing. Global demand is still pretty strong, a bit stronger than many people feared," said Tao Wang, economist with UBS in Beijing.
"On the import side, we think that commodity exports had been very strongly up until February and there has been quite a bit of inventory build-up. So right now we think it's going through some adjustment."
But Xu Biao, an economist with China Merchants Bank in Shenzhen, said the lower-than-expected imports might contain a much more serious warning.
"Concerns about a slowdown have certainly intensified, and the risks of a worst-case scenario for the Chinese economy, namely a relatively low growth rate and a high inflation, are on the rise," he said.
The median forecast of economists polled by Reuters last week was for exports to rise 29.4 percent and imports to grow 28 percent, resulting in a trade surplus of $3 billion.
On a seasonally adjusted basis, exports rose 35.1 percent in April from a year earlier and rose 12.3 percent from the previous month. Imports gained 27.4 percent year-on-year and 7.4 percent month-on-month, the customs administration said.
China's trade numbers also registered an impact from Japan's earthquake and subsequent nuclear crisis. Imports from Japan were $16 billion in April, down 14.9 percent from March, as production and shipments were interrupted.
WEAK YUAN POLICY
The strong data, including a 16 percent rise in China's trade surplus with the United States to its widest since November, came as senior U.S. and Chinese officials met in Washington for a two-day Strategic and Economic Dialogue.
The data could give fresh ammunition to some U.S. lawmakers who have linked the trade imbalance to China's currency policy, saying a weak yuan gives Chinese manufacturers an unfair advantage in global markets.
Higher import costs, along with the government's efforts to rebalance the economy in favor of domestic consumption to reduce reliance on exports, could lead to a smaller trade surplus for 2011 from last year's $183 billion.
Chinese officials hope a smaller trade surplus with the rest of the world could ease criticism from key trade partners that it has given exporters an unfair boost with a cheap currency.
Still, there are plenty of signs that the government will tolerate faster yuan appreciation this year as it seeks to deal with imported inflation.
China loosened the yuan from a nearly two-year peg to the dollar in June, and this year the People's Bank of China has guided the yuan to record highs. It has now appreciated about 5 percent since June and 1.5 percent since the start of this year.
China already is the world's biggest exporter and so has little scope to increase its exports further, while its demand for imports is increasing in leaps and bounds alongside its turbo-charged growth.
Investors have long feared an abrupt slowdown in the world's second-largest economy, which could stifle a pivotal source of demand as a global buyer of everything from raw materials to consumer goods.
The latest data showed that China, the world's second-largest oil buyer, imported 1.7 percent more oil than a year earlier, bringing in 5.24 million barrels per day in April, the third highest on a daily basis.
Imports of copper were much weaker, down nearly 14 percent from March in volume terms. But rather than heralding a sudden drop-off in Chinese economic activity, analysts said the shortfall indicated that firms were shunning high-priced overseas supplies in favor of local producers and stockpiles.
The government, seeing little sign of a hard-landing in the economy, is likely to raise banks' required reserves and interest rates while letting the yuan rise at a faster clip as inflation remains the biggest concern, analysts say.
"I think over-tightening is the key risk for China. However, it may be too early to call for over-tightening based only on April imports," said Dongming Xie, China economist at OCBC Bank in Singapore.
"Compared with interest rate policy, maybe China may rely more on the currency policy to tackle inflationary pressure now."
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