China trade surplus up but export growth weaker

China's trade surplus set to a new record in October but export growth weakened, adding to pressure on the economy as Beijing launches a multibillion-dollar stimulus package, according to data reported Tuesday.

China's October global trade gap swelled by 30 percent to $32.5 billion, hitting a new high for a third straight month, the national customs agency reported. The surplus with the United States rose 13.6 percent to $17.5 billion, while that with Europe rose 12.2 percent to $15.6 billion.

But that masked a drop in export growth and an even sharper fall in import growth, which widened the trade gap and reflected limp Chinese domestic demand.

"The global financial crisis has had a considerable impact on China's export growth, which will continue to show weakness with recession in the U.S. and Europe," said a report by Jing Ulrich, JP Morgan & Co.'s chairwoman for China equities.

Beijing's 4 trillion yuan ($586 billion) stimulus plan unveiled Sunday is aimed at shielding the world's fourth-largest economy from the global downturn by boosting domestic consumption with higher spending on construction and social programs.

China's government is trying to reduce reliance on exports by encouraging the country's own consumers to spend more. Retail sales have been growing at annual rates of over 20 percent but are still small as a share of the economy.

Exports rose 19.1 percent to $128.3 billion, but that growth rate was down from September's 21.5 percent and sharply lower than the recent peak of 26.9 percent in July.

The unexpectedly sharp downturn in demand for Chinese goods has caused a wave of factory closures and layoffs in the export-driven southeast. Exporters say customers are cancelling orders and trying to renegotiate contracts.

Weaker demand for Chinese goods is expected to cause economic ripples to spread worldwide as China's manufacturers buy less imported factory machinery, industrial components and raw materials such as steel made with foreign iron ore.

The government's stimulus plan includes tax cuts for exporters to help struggling producers of textiles and other goods.

China's imports in October rose 12.4 percent to $93.1 billion, compared with September's 21.3 percent growth rate.

For the first 10 months of the year, China's trade surplus was $215 billion, but that was an increase of just over 1 percent compared with the year-earlier period, according to customs agency data.

"As the contribution of trade to China's economic growth dissipates, we expect further measures to be introduced aimed at stimulating consumption and investment in the domestic economy," Ulrich said.

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China Customs: http://www.customs.gov.cn

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