A SURGE in Chinese exports and rising anger in the US Congress will put renewed pressure on China to allow its currency to rise against the US dollar.
Chinese trade figures showed exports leaping by 48.5 per cent in May over the year before, way ahead of analysts’ forecasts. Data released in the US showed America’s trade deficit widening slightly in April, with some economists arguing the improvement in net trade and its contribution to US growth appeared to have stalled.
The data gave more ammunition to China’s critics in the US Congress, who have said they will proceed with legislation to restrict Chinese imports to correct the perceived misalignment of the country’s currency. The US treasury has been pursuing quiet diplomacy with Beijing to allow the renminbi to rise, but lawmakers said they were losing patience.
Charles Schumer, New York senator and the third most senior Democrat in the Senate, said he would seek to have his Bill made into law within two weeks unless he saw signs of action from Beijing. “We need to take stronger action than this back-and-forth,” he told treasury secretary Tim Geithner who was testifying to the Senate finance committee.
Mr Geithner said it was important for China to understand that the legislative move in the US had very broad support. “I think the strength of the sentiment in Congress is overwhelmingly strong, it’s bipartisan and it reflects how important this is to the United States,” he said.
However, Mr Geithner argued that China’s trade surplus had fallen by about half as a share of its gross domestic product over the past two years, and said that US exports to China had been rising sharply. “As we emerge from the global financial crisis, US exports to China have rebounded much more rapidly than overall US exports, and are now running 20 per cent above their pre-crisis levels,” he said.
Earlier in the year, many investors expected that the renminbi might be allowed to resume its upward movement against the dollar as early as mid-June. But that predicted date has been pushed back as the Greek crisis and fall in the euro have left Beijing unwilling to see an appreciation against the currencies of both its major export markets.
The strong increase in Chinese exports announced yesterday meant that China recorded a trade surplus in May of $19.5 billion, significantly larger than the $1.7 billion surplus reported in April and March’s modest trade deficit. With house prices still rising in China, the trade data will also renew discussion about whether the economy is overheating.
Coming after Taiwan also announced strong export figures for May, Ben Simpfendorfer, an economist at RBS in Hong Kong, said the case for an appreciation in the Chinese currency was becoming stronger again. The numbers “suggest that global imbalances are worsening again, after earlier improvement,” he said. “The trade data argues for an early move on the currency.”
The US data showed a trade deficit of $40 billion, similar to the two previous months. – Copyright The Financial Times Limited2010
