China’s ‘One-Off’ Trade Deficit May Return, Government Says

May 17 (Bloomberg) -- China’s trade deficit in March, described by some economists as a “one-off event,” may be repeated in coming months, the nation’s commerce ministry said.

“Monthly figures this year will hover at either side of the balance point,” spokesman Yao Jian said at a press briefing in Beijing today. The full-year trade surplus is likely to “fall sharply,” he said.

China’s leaders may point to a narrowing surplus to argue in talks with the U.S. in Beijing next week that the yuan’s value isn’t a key factor in global economic imbalances. Yao’s assessment contrasts with Morgan Stanley saying May 10 that the nation is likely to report surpluses “through the rest of the year and beyond.”

Goldman Sachs Group Inc. said the same day that the March deficit was a “one-off event,” likely partly resulting from distortions caused by a Lunar New Year holiday. The sovereign debt crisis in Europe has intensified since those comments, clouding the outlook for shipments from China, the world’s biggest exporter.

Yuan forwards weakened the most in a week today on speculation that China will delay appreciation of its currency because of the European crisis. Twelve-month non-deliverable forwards fell 0.5 percent to 6.6995 per dollar as of 2:28 p.m. in Hong Kong. The Shanghai Composite Index tumbled 5.1 percent.

China will “closely monitor” the crisis, which could delay the recoveries of Europe and the world, Yao said. The yuan has strengthened more than 14 percent against the euro this year, putting “tremendous pressure on Chinese exporters” and affecting any “adjustment” of trade policies, he said.

Political Issue

Yao reiterated that China’s currency policy “shouldn’t be politicized,” and said that the nation will follow its own assessment of the world and Chinese economies when considering that policy.

“Various parties, including academic and industrial circles, have reached consensus that the yuan’s exchange rate isn’t the source of the Sino-U.S. trade surplus, nor the root cause of global imbalances,” Yao said.

U.S. Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Clinton will take part in the U.S.-China Strategic and Economic Dialogue in Beijing. Geithner is “confident” that China will let the yuan rise against the U.S. dollar, he said in a Bloomberg Television interview last week.

China has held the yuan at about 6.83 per dollar since July 2008, helping exporters to weather the global financial crisis.

Trade in the first four months of the year “has pretty much set the path for the full-year trend,” Yao said.

The trade surplus narrowed 79 percent from a year earlier over that period as domestic demand and commodity costs drove a 60 percent increase in imports. In April, China posted a trade surplus of $1.68 billion after a shortfall of $7.24 billion in March that was the first in six years.

In 2009, the trade surplus shrank 34 percent to $196 billion. Increased balance in international payments will aid management of the economy, Yao said today.

--Li Yanping. Editors: Paul Panckhurst, Michael Heath.