- China’s nine-month low trade surplus comes just days before Presidents Hu Jintao and Barack Obama meet to discuss (amongst other things) persistent global trade imbalances.
- Yet the narrowing trade surplus last month is unlikely to subdue U.S. policymaker criticism of China’s pro-exports policies.
- The trade surplus with the U.S. constituted almost the entirety of China’s US$183.1 billion calendar year surplus.
- China is gradually making the transition to more domestically oriented growth and rebalancing its economy away from a reliance on the external sector.
- The change already occurring within China will invariably have a greater influence on the future trajectory of monthly foreign trade results than next week’s high-level Sino-U.S. discussions.
- An increasingly affluent and consumer-driven society will result in higher imports and cause the trade surplus to dwindle in coming years.
As if almost on cue, China reported a nine-month low trade surplus for December, just days ahead of high-level meetings between Presidents Hu Jintao and Barack Obama, which are slated to discuss (amongst other things) persistent global trade imbalances. Exports were down in seasonally adjusted month-on-month terms in December while imports were higher, giving credence to Beijing’s claims that it is gradually rebalancing the economy and reducing the nation’s dependence on exports to drive growth.
Yet the narrowing of China’s trade surplus to a comparatively meagre US$13.1 billion in December is unlikely to subdue U.S. policymaker criticism of China’s pro-exports policies and accusations regarding currency manipulation. China’s persistent trade surplus with the U.S. totalled US$181.3 billion in 2010—constituting almost the entirety of China’s US$183.1 billion calendar year surplus.
With the U.S. recovery showing signs of gaining traction and the likelihood of U.S. imports of Chinese goods rising further in the year ahead, the yawning Sino-U.S. trade gap is set to widen further in the year ahead.
But to its credit, China is making the transition to more domestically oriented growth and rebalancing its economy away from a reliance on the external sector. Imports growth dominated exports growth during 2010—imports grew 38.7% year-on-year last year versus exports growth of 31.3%.
Meanwhile, December’s record imports total eclipsed November’s then-record by a considerable margin, underscoring the extent to which growing consumer demand is supplanting energy and commodities demand as the driver of Chinese imports growth.
The presidential discussions scheduled for 19 January will undoubtedly be important for Sino-U.S. relations. The talks come at a critical juncture for both countries, as the U.S. seeks growth drivers to support its recovery and China paves the way for continued globalization and internationalization of its economy.
But the change already occurring within Asia’s largest economy will invariably have a greater influence on the future trajectory of China’s monthly trade results. Regardless of the yuan's value, an increasingly affluent and consumer-driven society will inevitably result in higher imports and cause the trade surplus to dwindle in coming years.
Beijing’s apparent willingness to allow further gradual yuan appreciation will encourage innovation in the exports industry and continued ascendancy up the value-added chain, further increasing incomes, diversifying employment opportunities, and supporting balanced, sustainable economic growth.
About the Author
Matt Robinson is a senior economist in the Sydney office of Moody’s Analytics, a division of Moody’s Corporation. Commentary produced by Moody's Economy.com is independent and does not reflect the opinions of Moody's Investors Service Inc., the credit ratings agency which is also a subsidiary of Moody's Corporation.
Orignal Author:
Matt Robinson, Moody's Analytics
2012, May 18 
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