China's trade surplus widened to the highest this year and exports climbed more than estimated to a record in June, adding pressure on the government to let the currency gain after the U.S. said the yuan "remains undervalued."
The gap increased 140 percent to $20.02 billion from a year earlier, the nation's customs bureau said on its website Saturday. That compares with the $15.6 billion median estimate of 24 economists surveyed by Bloomberg News. Exports surged 43.9 percent and import growth moderated for the third month, rising 34.1 percent. Exports to the U.S. and European Union jumped by more than 40 percent for the second month, and exports to Russia climbed 84 percent in June, according to today's statement.
U.S. Treasury Secretary Timothy F. Geithner said July 8 he will "closely" monitor the yuan's appreciation after China scrapped a two-year peg to the dollar and allowed a 0.8 percent advance in the past three weeks. Policy makers in the world's biggest exporting nation may be reluctant to step up gains as Europe's debt woes threaten demand even as the bureau said trade has "recovered" to levels before the global financial crisis.
The surplus "points to the need for Chinese authorities to allow continued appreciation of the yuan against the U.S. dollar, given their pledge to allow market forces to determine the exchange rate," Wang Qing, a Hong Kong-based economist at Morgan Stanley, said. He estimates the yuan will gain 4 percent by the end of this year and 6 percent next year.
China took a "significant step" last month when it began to allow markets to drive the currency higher, the Treasury Department said in a report to Congress released July 8, after postponing the release in April. It's not yet clear whether the policy shift will correct the yuan's undervaluation, it said.
New York Democrat Senator Charles Schumer called the report "disappointing," saying "it's clear it will take an act of Congress to do the obvious and call China out for its currency manipulation."