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Last Updated: Monday, 12 June 2006, 09:04 GMT 10:04 UK
China trade surplus at fresh high
Yangshan deep water port in Shanghai
China's economic boom has been driven by exports
China reported a fresh record monthly trade surplus of $13bn (7bn) in May, the latest sign that the country's economy is continuing to surge.

It beat the previous high of $12bn set last October, and brought the surplus for the first five months of 2006 to $46.8bn, up from $30bn a year earlier.

The latest figures are likely to renew calls, particularly from the US, for China to raise the value of the yuan.

The US says Beijing keeps the yuan artificially low, which China denies.

While Washington accuses China of maintaining a low yuan to give Chinese exporters an unfair advantage, Beijing counters that raising the value of the yuan too quickly could destabilise the sector and lead to job losses.

'Domestic weakness'

The difficulty for China is that while its economy has boomed in recent years, the vast majority of the growth has been through exports.

The structural adjustments pledged by the government...will need time to show their effects
Economist Wang Chuanglian

Analysts do not expect Beijing to allow the yuan to increase to any significant degree until its ongoing efforts to boost domestic consumption start to bear fruit.

Economists say the domestic economy is continuing to lag behind the export sector because the population is saving too much money instead of spending it.

"The trade surplus is very much a structural problem and adjusting the exchange rate alone will not resolve the problem," said Wang Chuanglian, economist at Great Wall Fund Management in Shenzhen.

"The structural adjustments pledged by the government, such as reducing the savings rate and boosting consumption, will need time to show their effects."

Rising inflation

China revalued the yuan by 2.1% last July and abandoned a dollar peg in favour of a managed float against a basket of currencies.

Yet the Chinese central bank has since let the yuan rise less than 1.2%.

Official Chinese data also showed on Monday that inflation rose 1.4% in May, up slightly from 1.2% in April.

Economist Chris Leung said Chinese inflation was being driven by the fast-growing property sector, which is experiencing a building boom in the big eastern cities.

In April, the Chinese central bank raised its one-year lending interest rate to 5.85% from 5.58% - the first increase for 18 months.




SEE ALSO
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