China's July Trade Surplus Widens to $25.3 Billion

By Nipa Piboontanasawat and Kevin Hamlin

Aug. 11 (Bloomberg) -- China's trade surplus unexpectedly widened 4 percent to $25.3 billion in July from a year earlier as exports surged.

That was more than the $20.25 billion median estimate of 16 economists surveyed by Bloomberg News and up from $24.4 billion a year earlier. The customs bureau released the figures on its Web site.

Exports rose 26.9 percent, accelerating from the 17.6 percent gain in June. Stronger growth in overseas shipments may encourage policy makers to allow faster gains by China's currency, the yuan, rather than shielding exporters by keeping their products cheaper.

``The weakness in exports was always exaggerated,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong. ``We expect the pace of yuan appreciation to accelerate.''

Imports increased 33.7 percent, up from 31 percent.

The yuan traded at 6.8615 versus the dollar as of 2:22 p.m., from 6.8588 at the close of trading on Aug 8.

The trade surplus had narrowed for each of the previous three months as commodity costs boosted the value of imports and demand for exports faltered on weakness in the U.S. economy.

The government has reined in gains by the yuan this quarter, eased bank lending quotas and raised export tax rebates for garments and textiles to protect manufacturers and stimulate the economy.

Yuan's Decline

The yuan has fallen 0.2 percent against the dollar this quarter after gaining 4.2 percent in the first quarter and 2.3 percent in the second.

China's economic growth slowed for a fourth straight quarter in the three months to June 30, expanding 10.1 percent. Gross domestic product growth below 9 percent would be ``unacceptable'' for a government targeting 10 million new jobs a year, according to a Credit Suisse Group report this month.

Statements last month by the central bank and the Politburo, the Communist Party's top decision-making body, suggested a shift toward growth rather than taming inflation that climbed to a 12-year high of 8.7 percent in February. Neither used the previous language of a ``tight'' monetary policy.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net