BEIJING (AFP) — China's trade surplus shrank more than 10 percent in the first quarter of 2008 as the Chinese export juggernaut felt the heat of a weaker US economy and a stronger yuan, official data showed Friday.
Higher labour costs and rising world oil prices also had an impact on exports, but strong growth in imports was an equally important factor in the surplus being contained to 41.42 billion dollars, analysts said.
The figure for the three months of the year was 10.8 percent lower than the same period in 2007, which may help to ease some of the tensions China has long felt with its major trading partners over the surplus.
China's trade surplus for March was 13.4 billion dollars, the custom bureau said, up from 8.56 billion dollars in February.
However that rise was seen as due to one-off factors, such as the Lunar New Year holiday falling in February and heavy storms forcing factories to close in that month, and that the surplus was likely to keep falling in the short term.
"A weaker overseas economy, higher domestic labour costs and prices as well as appreciation in the yuan are all weakening exports. I think this trend will continue," said Chen Jijun, a Beijing-based economist with CITIC Securities.
Zhang Ming, an economic researcher at the China Academy of Social Sciences, predicted the surplus for all of 2008 would be smaller than last year, but pointed out that this would still be extremely big.
"The trade surplus last year was the highest ever. I think we will see a slowdown in this year's figures, the second quarter will be very similar to the previous quarter, although the numbers remain huge," he said.
Indeed, the trade surplus last year reached 262.2 billion dollars, a surge of nearly 50 percent from 2006 and a 10-fold rise from 2003.
In the first quarter of 2008, exports rose 21.4 percent over the same period last year, while imports increased by 28.6 percent, according to Friday's customs data.
Total trade in the first quarter reached 570.4 billion dollars, up 24.6 percent from the same period last year.
During the first quarter, the yuan's rise against the dollar picked up pace, somewhat calming US critics who have complained that an artificially weak Chinese currency has given China's exporters an unfair advantage.
On Thursday, the yuan broke through 7.000 to the dollar for the first time since Beijing scrapped its peg to the greenback in July 2005, meaning it has risen by about 18 percent to the dollar since then.
US Treasury chief Henry Paulson was in China last week, and told President Hu Jintao that he considered the recent appreciation of the yuan to be "very material progress," but still not what he wanted, a market-driven currency.
However the export performance in the first quarter could lead to stronger voices in China calling for the pace of currency appreciation to slow.
The official Xinhua news agency on Friday highlighted the impact of a stronger yuan on exports.
"The pace of appreciation was too fast, dealing a heavy blow to small and medium-sized Chinese exporters," Xinhua cited Zhang Yansheng, from the government's National Development and Reform Commission, as saying.
The performance of the US economy was also seen as having a significant impact on China's trade performance. Chinese Premier Wen Jiabao last month said the situation in the United States was one of his top economic concerns.
"I am paying great attention to the world economy, I am especially deeply worried about the US economy," Wen said.
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