China's exports for June hit a record high since July 2008 and the trade surplus also surged to the highest this year, but economists insisted such strong momentum cannot be sustained and there is little possibility that the yuan will gain by large margins, as widely expected worldwide.

Customs said on its website that China's shipment of exports last month grew by 43.9 percent from the previous year to US$137.4 billion and imports rose by 34.1 percent to US$117.4 billion, which led to a US$20 billion trade surplus, another record high.

Both the trade surplus and the exports are at their highest level in two years, compared with US$136.68 in July 2008, according to Customs.

"There are reasons for the fast growth in exports in June, but the prospects are unhopeful in the second half of the year given a series of factors, including the European debt crisis, gradual appreciation of the yuan and rising costs for raw materials and labor," said Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation, which is affiliated with the Ministry of Commerce.

In late June, the Chinese government announced it would remove tax rebates on a variety of goods for the export market, including steel products, which is due to take effect on July 15.

With the looming policy change, a number of exporters accelerated the rate of their shipments, which has resulted in stronger-than-expected exports, said Zhu Jianfang, chief economist at CITIC Securities.

During the first six months, the export of steel products more than doubled from the previous year to 23.6 million tons, Customs said. The specific figures for June were unavailable.

The increased trade surplus and high level of exports, once again, sparked criticism from some quarters in the US, which added pressure on the Chinese government to allow the yuan to rise further.

Last Friday, the US launched its Semi-Annual Report on International Economic and Exchange Rate Policies, which did not label China as a currency manipulator, though the report insisted that the yuan was "undervalued".

Chinese economists disagree. "I do not foresee either a sharp rise or a big fall in China's trade surplus for the rest of the year. Due to the continuing effects of the global economic crisis and China's policy changes, trade will remain balanced. So the possibility or necessity of allowing the yuan to rise rapidly remains remote," said Li Daokui, a professor at Tsinghua University as well as a member of the Chinese central bank's monetary policy committee.

Over the past three weeks, the yuan gained by 0.8 percent. US lawmakers claimed the yuan was still undervalued and called on the Obama Administration to raise the issue with the World Trade Organization.

"The pressure will continue for months until the mid-term election campaigns in the US. The US argument about the yuan does not make any sense, as foreign exchange reform does not mean a large rise in appreciation," said Zhou Shijian, a senior economist at the Center for China-US Relations, Tsinghua University.

From January to June, China's imports and exports grew by 43.1 percent year on year to US$1.35 trillion, which prompted Customs to say that trade "has recovered to pre-crisis levels".

Exports to the US and European Union in June surged by over 40 percent for the second month, while exports to Russia climbed by 84 percent. Brazil rose in rank to become one of China's top 10 trade partners and exports to Brazil grew by 125 percent in June.

Imports showed a more moderate rate of growth for the third month, with iron ore and copper imports falling, while imports of net crude oil increased to 22.14 million metric tons.

(China Daily July 12, 2010)