China's trade surplus rises to $40.1bn

CHINA'S TRADE surplus soared to a record $40

CHINA'S TRADE surplus soared to a record $40.1 billion (€31 billion) in November, with both exports and imports collapsing during the month, fuelling fears that the global recession is also forcing a hard landing for the Chinese economy.

The collapse of the crucial export market has seen Chinese companies lay off thousands of workers, but Beijing's response with the world's biggest ever fiscal stimulus worth four-trillion yuan (€450 billion), was supposed to have addressed many of the fears that the world's most populous nation would also slide into recession. Data showed that exports declined 2.2 per cent in November from a year earlier, while imports fell 17.9 per cent, suggesting that the global downturn is driving the world's fourth-largest economy into a slump.

This marks the first time in more than seven years that China has seen a negative monthly export growth, with the last time being June 2001.

China's exports quadrupled after the country joined the World Trade Organisation in 2001, which helped to make it the fastest-expanding major economy in the world, and in latter years, the biggest contributor to global growth.

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Exports to the EU fell nearly 16 per cent to 0 per cent year on year, while exports to the US fell 12.4 per cent. The trade figures show that China is also sensitive to the global crisis, although the full impact of the wide-ranging fiscal measures, which are focused on developing infrastructure, has yet to be absorbed.

Chinese media reports focused on slowing inflation, and the government pledged "more forceful measures" to help small companies and create jobs.

The government will target a minimum 8 per cent increase in GDP next year and the creation of 10 million jobs, according to the China Daily. The World Bank believes the Chinese economy will grow by 7.5 per cent next year.

The trade figures increase the pressure on Beijing to add to last month's steepest interest-rate cut in 11 years, extending the fiscal stimulus and allowing the yuan depreciate. "We suspect the problem in trade finance may have contributed to the declines in both export and import," said Wang Tao, head of China Research at UBS Securities.

"Given the deepening global financial crisis and deteriorating global economic outlook, we expect more negative growths of export in the coming months. We do expect trade finance to improve in a few months.

"The government may come out with more policy measures to help exporters, including improving trade finance, but we don't think China will devalue the currency. We maintain our forecast of zero export growth for 2009," said Ms Wang.