http://online.wsj.com/article/BT-CO-20100810-706876.html
BEIJING (Dow Jones)--China recorded its biggest trade surplus in a year and a half for July, government data showed Tuesday, likely adding to the pressure on Beijing to allow faster yuan appreciation.
A sharp slowdown in import growth meant that China's trade surplus widened to $28.7 billion in July from $20.02 billion in June, surpassing expectations of a $19.6 billion surplus in a poll of economists. July's surplus was the biggest since January 2009's $39.11 billion.
The data come ahead of U.S. trade figures for June, due out on Wednesday and which are likely to show a trade deficit of more than $40 billion.
"This contrast in the trade position of the two most important economies in the world will likely increase the pressure from Washington for Beijing to allow further currency appreciation, particularly in the lead-up to mid-term elections in November," Royal Bank of Canada economist Brian Jackson wrote in a note.
July's slower imports growth is the latest sign that economic activity in China is easing as the impact of stimulus spending, which created a construction boom resulting in massive demand for imports of raw materials and equipment, has faded. Government measures to cool property-market speculation and crack down on polluting, energy-intensive industries have also contributed to the slowdown.
Property market figures also out on Tuesday illustrate the slowing construction activity, which is leading to lower demand for imported raw materials. China's National Bureau of Statistics said investment in real-estate development, one of the main forms of private investment in China, rose 33.0% in July from a year earlier to CNY411.8 billion ($60.82 billion), but slowed from June's year-on-year 46.3% increase to CNY583.0 billion. Analysts expect a further slowdown in property investment in the coming months.
Nationwide property sales fell 15.4% to 64.7 million square meters in July from the same period a year earlier. July's sales were down 29.4% from 91.6 million square meters in June.
Despite the decline in sales, urban property prices in 70 Chinese cities were unchanged in July from June, and 10.3% higher than a year earlier, according to government data, highlighting the challenges Beijing faces in keeping asset-price inflation in check and dashing any hopes of a potential easing in the sector's tightening measures.
Analysts said the resilience of property prices indicates Beijing won't be eager to loosen its measures to cool the sector, which include higher mortgage downpayment requirements for second and third homes. They see prices and sales dropping further in the coming months.
Exports grew 38.1% in July from a year earlier, China's Bureau of Customs said, slowing from June's 43.9% rise, but beating economists' expectations of a 36.3% increase.
The data showed no signs that exports to the European Union have been weakening, as some analysts had expected. Exports to the EU rose 5.4% to $28.67 billion in July from $27.2 billion in June, and were up 38.3% from July 2009.
Zheng Yuesheng, director of the statistics department of the General Administration of Customs, said the effect of the European sovereign debt crisis on China's exports will likely appear in the fourth quarter, China state radio reported Tuesday, suggesting exports growth may slow more obviously later this year.
July imports rose 22.7%, down sharply from June's 34.1% increase and well below expectations of a 30.2% rise.
The weak import growth affected stock markets around Asia on Tuesday, raising concerns that softening Chinese consumption could have negative implications for the global recovery. The Shanghai Composite Index ended down 2.9% at 2595.27, reversing early-morning gains.
Analysts said the larger trade surplus makes yuan appreciation more likely in the coming months.
"China says it will allow market supply and demand to determine the exchange rate. Well, the balance of payments is the most important factor in the market supply and demand picture," said Morgan Stanley economist Wang Qing.
The yuan has risen 0.77% against the dollar since Beijing's June 19 announcement that it would increase the exchange rate's flexibility, effectively ending a two-year peg to the dollar.
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