Chinese policymakers are beginning to worry about a rallying currency that is putting pressure on the country's exports. Figures for August show slower-than-forecast growth, which has also been hit by weak global demand.
According to fresh figures published by the Customs Administration on Friday, China's exports increased 5.5 percent year-on-year — down from 7.2 percent in July and well off the 6.0 percent analysts predicted in a poll for financial news agency Bloomberg.
In the same month, however, imports climbed 13.3 percent, beating July's 11 percent and the 10.0 percent forecast in the Bloomberg survey. The trade surplus for the month came in at $42.0 billion (34.8 billion euros).
Analysts said that strong imports reflected the momentum of rising domestic demand in the world's second biggest economy, while faltering export growth was due to weaker global demand.
Coming about a month before an important Communist Party conference in October, the figures present mixed news for China's leaders who are trying to recalibrate the country's growth model from one driven by exports and state investment to one based on domestic consumption.
The Chinese economy saw better-than-expected growth in the first two quarters of the year thanks to debt-fueled investment in infrastructure and real estate although warnings of a potential financial crisis have spurred Beijing to clamp down.
Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group, believes that China's third-quarter growth will see an "upside risk again" in light of the latest figures.
A main source of risk is the rising yuan which has enjoyed a resurgence in recent weeks and is now at a 21-month high to the US dollar as a result of policy uncertainty in the United States and more optimism about China's economic outlook.
The yuan's rapid turn in fortunes comes after a massive slide last year which saw China's currency drop to 7 yuan for 1 dollar, forcing China's leaders to impose curbs on capital outflows. The current rebound, however, saw the yuan rise to just above $6.5 earlier this week and extending its gains until Friday to hit $6.44.
According to the news agency Reuters, currency fluctuation is worrying Chinese leaders because any disruption to the economy would be unwelcome ahead of the party conference.
"Appreciation is better than deprecation, but the pace of appreciation cannot be too fast, otherwise it will be unfavorable for domestic firms," said one of several policy insiders who spoke to Reuters.
Another source told the news agency that especially Commerce Ministry officials were worried, describing a sharp rise in the value of the yuan as "disastrous" for exports.
uhe/aos (Reuters, AFP)