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June 14, 2010

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Alarm bells ring for Chinese exporters

CHINESE exports that boomed last month were likely to tumble in the second half of the year due to debt woes in the crucial European market, the Commerce Ministry said over the weekend.

China's exports surged by nearly 50 percent in May, exceeding most analysts' forecasts and producing a monthly trade surplus of US$19.5 billion.

Exports to the 27-nation European Union were up 34.4 percent in the month from a year earlier, while exports to the United States rose 24.8 percent. China's trade surplus with the US was US$16.7 billion.

Those numbers would likely weaken considerably in coming months due to a slow recovery in European countries saddled with large amounts of sovereign debt, along with rising labor costs and higher commodity prices, Commerce Ministry spokesman Yao Jian told reporters at a news conference.

"Europe is our country's largest trading partner," Yao said. "Given the murky and not at all optimistic climate, the stability of our trading policy is paramount."

Exports to Europe, whose debt problems are expected to hurt consumer spending, grew by 34.4 percent from January to May, the ministry said.

China's overall exports shot up 48.5 percent in May alone to US$131.7 billion, with imports up 48.3 percent.

The strong trade figures have rekindled concerns that Washington and other governments will renew pressure on China to let its currency rise.

Analysts expect the yuan to rise this year but say China's leaders will act only once it is clear global demand has recovered.

Chinese officials have cited the decline in the euro's value as a major woe for the nation's exporters, making Chinese products more expensive in Europe and contributing to sentiment against allowing the yuan to rise.





 

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