China's surging exports adds to tensions with US

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The Independent Online

China's trade surplus with the rest of the world surged in April, with record exports driving the world's second-largest economy to a $11.4bn (£6.97bn) positive balance for the month.

The sheer scale of the rise is sure to add to growing tensions between the United States and China over Beijing's policy of keeping the renminbi undervalued to boost sales aboard, particularly to America. Four times greater than expected, the surplus is in stark contrast to the rare deficit recorded in the first quarter of the year, and comes as top Chinese officials visit Washington for the latest round of talks in the two nations' strategic and economic dialogue.

Barack Obama met the Chinese Vice-Premier Wang Qishan on Monday. Vice-President Joe Biden, Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton are also involved in the meetings. China's exports rose by almost 30 per cent on a year earlier to $155.7bn, while imports only climbed by 21.8 per cent, the latter depressed by falling shipments from Japan, as natural disasters disrupted trade. Imports may also have been constrained by successive increases to interest rates by the People's Bank of China, coupled with other moves to cool demand and inflation.

But it is the situation with the US that has focused the minds of analysts. The data showed China's trade surplus with America grew by 16 per cent to its widest since November. And while China's overall trade surplus with the rest of the world narrowed last year, its surplus with the US grew 26 per cent to more than $180bn.

Washington has long tried to persuade China to allow its currency to move upwards; despite bilateral negotiations and various declarations of intent at G20 summits, little concrete progress has been made. Nor is there likely to be much movement in the latest Washington talks. The state-controlled People's Daily newspaper said: "It is not as if China has been deliberately trying to defy comments or suggestions that the US has raised. Notice has been taken of all the complaints and demands. But China cannot and will not simply follow the US."

The People's Bank revalued the renminbi marginally on Monday, to leave it up 1.5 per cent since the start of the year but nowhere near enough to assuage its US critics.

Sino-US relations, already strained by differences over other issues such as North Korea, are also complicated by China's $2 trillion-plus holdings of dollar-denominated reserves, of which about half is US Treasury paper.

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