China Trade Surplus Plunges

China’s trade surplus plunged in February as exports fell by a record, adding pressure on the government to spur domestic consumption to prop up the world’s third-biggest economy., Bloomberg 3/11/2009 5:20:53 AM

The trade gap narrowed to $4.8 billion, about an eighth of the amount in the previous month, the customs bureau said in a statement. Exports tumbled 25.7 percent from a year earlier. Imports fell 24.1 percent.

The government has halted the yuan’s gains against the dollar and plans to cut export taxes to zero as demand dries up because of the global slump. Premier Wen Jiabao is relying on a 4 trillion yuan ($585 billion) stimulus package to propel economic expansion after the weakest growth in seven years threw millions out of work.

Exports fell 17.5 percent in January and imports declined a record 43.1 percent.

After hitting a record $40 billion in November, China’s trade surpluses may stay below $20 billion for the next six months because of weaker demand, said Xing Ziqiang, an economist at China International Capital Corp. in Beijing.

China has responded to the collapse in world trade by halting the yuan’s three-year advance against the dollar in July last year and reducing export taxes on products from toys to textiles.

The government plans to gradually cut all export taxes to zero to support overseas shipments, Commerce Minister Chen Deming said this week. More than 30 percent of the goods produced in Chinese factories are sold overseas, he said, in an interview published in Study Times, a Communist Party newspaper.

Plunging exports and imports forced 20,000 small- and medium-sized companies in China’s Guangdong province to close since October, shedding 2 million jobs, the Nanfang Daily newspaper reported last month.

Those feeling the squeeze include suppliers to companies such as Mattel Inc., the world’s biggest toymaker, and U.S. department-store chain J.C. Penney Co. U.S. consumer confidence has tumbled as a recession deepens in the world’s biggest economy.

China Trade Surplus Plunges