June 11, 2010 3:00 am
A surge in Chinese exports and rising anger in the US Congress will put renewed pressure on China to allow its currency to rise against the dollar.
Chinese trade figures showed exports leaping 48.5 per cent in May over the year before - way ahead of analysts' forecasts. Data released in the US showed America's trade deficit widening slightly in April, with some economists arguing that the improvement in net trade and its contribution to US growth appeared to have stalled.
The data gave more ammunition to China's critics in Congress, who say they will proceed with a bill to restrict Chinese imports to correct the perceived currency misalignment.
Yesterday, Tim Geithner, US Treasury secretary, warned China that congressional anger on the subject could result in rapid action. "I think the strength of the sentiment in Congress is overwhelmingly strong, it's bipartisan and it reflects how important this is to the United States," he told the Senate finance committee.
Charles Schumer, a senior Democrat in the Senate, said he would seek to have his bill made law within two weeks un-less he saw signs of action from Beijing.
The US Treasury has been pursuing quiet diplomacy with Beijing to allow the renminbi to appreciate, but Mr Geithner told the committee yesterday that he had no idea when that might happen.
In what appeared to be a shift in tone, he signalled that he shared much of the frustration in Congress and suggested China needed to recognise how close the US was to legislation.
However, Mr Geithner argued that China's trade surplus had fallen by about half as a share of its gross domestic product over the past two years, and said that US exports to China had been rising sharply.
Earlier in the year, many investors expected that the renminbi might be allowed to resume its upward movement against the dollar as early as mid-June. But that date has been pushed back as the Greek crisis and fall in the euro have left Beijing unwilling to see an appreciation against the currencies of two top export markets.
The strong increase in Chinese exports announced yesterday meant it recorded a trade surplus in May of $19.5bn (£13bn), larger than the $1.7bn surplus reported in April, and March's modest trade deficit.
With house prices still rising in China, the trade data will also renew debate on whether the economy is overheating.
Coming after Taiwan also announced strong export data for May, Ben Simpfendorfer, an economist at RBS in Hong Kong, said the case for an appreciation in the renminbi was strengthening. The figures "suggest that global imbalances are worsening again, after earlier improvement," he said.
The US data showed a trade deficit of $40bn, similar to the two previous months.
Steven Ricchiuto, chief economist at Mizuho Securities, said: "The trade deficit data also shows the improvement in trade flows has stalled . . . The second-quarter GDP report will see little benefit from an improving trade picture."
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