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China's Trade Surplus Swells to Record $18.8 Billion in August

The widening imbalance is intensifying pressure on the government to loosen its controls on the yuan.

September 12, 2006|From the Associated Press

BEIJING — China reported Monday that its trade surplus hit a record high for a fourth straight month in August, adding to pressure for the country to strengthen its currency as U.S. Treasury Secretary Henry M. Paulson Jr. prepares to visit Beijing next week.

The August surplus climbed to $18.8 billion, the official New China News Agency reported, citing data from the Chinese customs agency. That was well above the previous record of $14.6 billion set in July.

China's growing trade gap has fueled demands by Washington and other trading partners for Beijing to raise the value of its currency, the yuan. That would make Chinese goods more expensive for foreign buyers and might restrain surging exports.

Paulson hasn't said whether he would press Chinese officials to ease currency controls when he makes his first visit to Beijing as Treasury secretary since assuming the job in July. But the yuan has been a key issue for other Treasury envoys, and experts expect Paulson to raise it as well.

Critics say the yuan is undervalued and gives Chinese exporters an unfair price advantage, hurting their foreign competitors and threatening thousands of jobs abroad.

China ended the yuan's direct link to the U.S. dollar in July 2005, switching to a system that bases the exchange rate on a group of world currencies. The yuan is allowed to fluctuate by a fraction of a percentage point daily and has risen only 2% against the dollar since then, disappointing U.S. officials.

This year, China's global trade surplus has grown to $95.6 billion, the New China News Agency said, nearly as large as the $102-billion gap for all of 2005.

In August, exports jumped 32.8% from the same month last year to $90.8 billion, and imports climbed 24.6% to $72 billion, according to the news agency.

For the eight months from January to August, exports jumped 25.9% from the same period last year to $599.6 billion, and imports rose 21.6% to $505 billion.

Chinese leaders say they plan eventually to let the yuan trade freely on world markets. But they say doing so too quickly could harm fragile Chinese banks.

Last week, Chinese Finance Minister Jin Renqing rejected complaints that Beijing's currency policies were to blame for trade imbalances.

"The global imbalance is more a result of globalization and macroeconomic policies taken by each country," he said in Hanoi at a finance meeting.

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