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UPDATE 2-China gets back to trade surplus, narrowly

Published 05/10/2010, 03:58 AM
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* China posts $1.7 bln trade surplus in April

* Exports up 30.5 pct y/y, rise 11.4 pct from March adj

* Imports up 49.7 pct y/y, up 6.9 pct from March adj

* Economists had expected second straight trade deficit

* Data do little to ease Beijing's worry about global economy

* Chart: http://link.reuters.com/zeh43k

(Adds quotes, m/m growth figures)

By Langi Chiang and Lee Chyen Yee

BEIJING, May 10 (Reuters) - China returned to familiar territory by posting a trade surplus in April, but exports only narrowly topped imports, providing limited comfort for policymakers fearful of another round of global economic turmoil.

China recorded a $1.7 billion trade surplus last month, defying expectations for a second straight deficit after March's $7.2 billion shortfall.

But if a trade surplus is the normal state of affairs for the world's largest exporting nation, the new normal could be smaller surpluses, reflecting China's growing domestic demand and the relatively frail health of the world's other major economies.

Exports rose an annual 30.5 percent in April, topping forecasts for 28.9 percent growth. Imports were up 49.7 percent from a year earlier, compared with predictions for a 53.8 percent increase.

"Expectations for yuan appreciation will continue to exist, but April's strong export figure alone will not have a big impact on timing," said Sun Wencun, an economist with CITIC Securities in Beijing.

China has frozen its currency against the dollar since mid-2008, trying to cushion its exporters from the global financial crisis.

Speculation had swirled in recent weeks that it was only a matter of time before Beijing let the exchange rate resume appreciation, but many analysts believe that international jitters in the wake of Greece's debt crisis could stay its hand.

"These (trade) numbers largely pre-date the escalation of the euro-area sovereign debt crisis and the sharp sell-off in the euro, so it is still too soon to tell whether we will see weaker European demand for Chinese exports in the months ahead," Brian Jackson, an economist with the Royal Bank of Canada in Hong Kong, said in a note.

BACK TO SURPLUS

China's leaders have said they want to be sure that external demand has made a sustained recovery before unwinding policies introduced at the height of the global credit crunch, including the yuan's de facto peg and a range of tax rebates given to exporters.

But the world's third-largest economy slipped into a trade deficit in March -- its first in six years -- more because of domestic vigour than external weakness.

With China growing 11.9 percent in the first quarter from a year ago, its appetite for energy and raw materials has been voracious.

April may prove something of an inflection point, with base effects over the rest of the year likely to push export growth rates higher, while the pace of import increases slows.

Exports rose 11.4 percent in month-on-month calendar adjusted terms, while imports were up 6.9 percent, the Chinese customs authority said.

Goldman Sachs economists Yu Song and Helen Qiao estimated that on a seasonally adjusted annualised month-on-month basis, exports grew around 25 percent and imports fell about 18 percent.

"We continue to believe the trade deficit (in March) was a one-off event and the trade surplus will likely increase throughout the year," they said.

Grace Ng, an economist with J.P. Morgan in Hong Kong, forecast that China would run a $100 billion trade surplus this year, down from a $196 billion surplus in 2009.

"We've been saying that the March trade deficit was temporary. We are looking for the full-year trade balance to come back into a solid balance situation," she said.

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