China trade surplus soars on strong foreign demand

China said yesterday its trade surplus soared in May on strong foreign demand for Chinese-made products, which analysts said could increase pressure on Beijing to let its currency strengthen.

The surge in exports - up 48.5 per cent from a year ago - suggested the eurozone debt crisis had not yet hurt demand for Chinese products, which could ease concerns of a slowdown in the world's third-largest economy.

The data came after US lawmakers on Wednesday vowed to launch legislative action in two weeks to punish China for refusing to revalue the yuan, claiming the currency is undervalued and gives the nation an unfair trade advantage.

China posted a trade surplus of $19.53 billion in May, compared with a surplus of $1.68 billion in April and a deficit in March - the first in six years, according to data released by customs authorities.

Exports totalled $131.8 billion in May. Imports gained 48.3 per cent year-on-year to $112.2 billion.

"Strong export growth and a sharp pick-up in China's trade surplus will not go unnoticed in Washington," said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong.

"With US unemployment still close to 10 per cent and Chinese exports now growing at a rate of almost 50 per cent, it is likely that the rhetoric on this issue coming out of Washington will soon get more heated."

Chinese President Hu Jintao stressed last month that his country would adjust its exchange rate policy at its own pace - "under the principle of independent decision-making, controllability and gradual progress".

But Mr Hu could come under pressure at a G20 summit in Canada this month, with US President Barack Obama facing new calls from Congress to get tough after his Administration backed off labelling China a currency "manipulator".

"We are going to move," Democratic Senator Charles Schumer said at a hearing of the US-China Economic and Security Review Commission, a panel appointed by Congress to monitor China's policies.

"In the next two weeks, my colleagues and I intend to move forward with legislation to provide specific consequences for countries that fail to adopt appropriate policy to eliminate currency misalignment," Mr Schumer said.

Beijing has effectively pegged the yuan at about 6.8 to the dollar since mid-2008 to prop up exporters during the global financial crisis and curb job losses in its vast manufacturing sector, which employs millions of people.

BNP Paribas analyst Erwin Sanft said the export data confirmed the March deficit was a "one-off" but he warned growth could slow in the coming months as the eurozone crisis and sluggish US economy hurt demand for Chinese goods.

"All the lead indicators - forward orders, purchasing managers' index, corporate cash flows - show that exports will be slowing down," said Mr Sanft.

After soaring 11.9 per cent in the first quarter, China's economy will be back to "single-digit" growth in the fourth quarter as government measures to slow the economy take effect, he said.

Property prices in China rose at a slower pace in May from the previous month, official data showed yesterday, suggesting the measures aimed at cooling the red-hot real estate market were working.

The cost of a home in major cities rose 12.4 per cent on year in May, the National Bureau of Statistics said on its website, down from a record 12.8 per cent year-on-year jump in April.

Manufacturing activity in China also slowed in May while auto sales have hit the brakes in recent months, easing fears of further tightening measures.