By Brian Love
PARIS, April 4 (Reuters) - China is expected to report its first monthly trade deficit in six years at the end of the week and Beijing could hardly have wished for better timing to counter renewed U.S. pressure for a stronger yuan.
President Hu Jintao cannot ignore the flak-deflecting value of a report, due on Saturday, that should show China's trade balance with the rest of the world slid into the red in March, for the first time since April 2004.
A break in the relentless rise of China's trade surplus raises doubts about arguments that, without rapid yuan appreciation, Beijing is ignoring pledges made with other G20 powers to create a more evenly keeled global economy.
China revalued the yuan by 2.1 percent against the dollar in July 2005 and then let it rise almost 19 percent further before calling a halt in mid-2008 to help its exporters ride out the global financial and economic crisis.
The country's overall trade surplus rose during those years even with the yuan appreciation of 2005-08. It fell 34 percent in 2009 despite the re-peg, albeit in a year when trade plunged globally.
Blip or not, the timing of the trade deficit announcement is perfect for China and not for U.S. Congress members pressing for legislation to allow retaliatory duties on imports from China if Beijing refuses to alter its currency policy.
Hu attends a nuclear security summit in Washington on April 12-13, ahead of publication -- initially set for April 15 but postponed on Saturday -- of a U.S. Treasury report that could brand China a 'currency manipulator.'
President Barack Obama faces increasing pressure to protect U.S. jobs and do so by taking China more firmly to task over the price advantage it has in world markets through a currency U.S. economists say is undervalued by up to 40 percent.
Obama received at least some good news on jobs when the U.S. Labor Department said on Friday private sector employment rose in March for only the third time since recession struck in 2007. The report showed firms stepped up hiring at the fastest pace in almost three years.
NOT TO BE DISMISSED
For some if not all economists, there is little reason to dismiss China's March trade report as a freak if, as Chinese Vice-Commerce Minister Chen Jian noted on Friday, it confirms a deficit caused by a surge in imports.
'China will certainly take the opportunity to remind its G20 partners that its policy strategy has led the global recovery,' said Marco Annunziata, London-based chief economist at UniCredit bank.
'And neither will it miss the opportunity to say it is now leading the reduction of global imbalances -- and that other countries are therefore ill-placed to teach lessons or offer advice.'
Beijing has the opportunity to make the point at a bilateral level in the week after publication of its March trade data, and at a broader level when finance ministers from the G20 group of economic powers meet on April 23.
One official involved in preparations for the G20 event said that even before the March trade figures nobody was in the mood to pick a fight with China at the moment, despite a widely held view the yuan is artificially weak.
'There are other countries in the G20 that are concerned about the collateral damage that could come out of such an escalation,' said the official, who asked not to be identified.
China's economic stimulus programme is widely credited with lifting broader activity in Asia and fueling demand now driving recovery in North America and Europe.
G20 leaders agreed late last year at a summit in Pittsburgh to steer clear of any potentially protectionist measures in the year ahead, mindful failure to do that was one of the main causes of the Great Depression of the 1930s.
They also agreed to start work on what they described as a new global framework for sustainable growth, implying without ever stating explicitly that this would in part happen by an exchange rate adjustment where the yuan is pivotal.
Pressing China too hard too fast may only make a difficult job even more difficult, especially at a time when much of the economic recovery depends largely on demand from faster-growing economies, notably China, said UniCredit's Annunziata.
'China's already doing its bit to reduce global imbalances. We can only hope that the U.S. Congress does not score an own-goal at the last minute,' he said.
(Editing by Andrew Hay) Keywords: ECONOMY WEEKAHEAD/OUTLOOK (brian.love@reuters.com; +33 1 49495339; Reuters Messaging brian.love@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
PARIS, April 4 (Reuters) - China is expected to report its first monthly trade deficit in six years at the end of the week and Beijing could hardly have wished for better timing to counter renewed U.S. pressure for a stronger yuan.
President Hu Jintao cannot ignore the flak-deflecting value of a report, due on Saturday, that should show China's trade balance with the rest of the world slid into the red in March, for the first time since April 2004.
A break in the relentless rise of China's trade surplus raises doubts about arguments that, without rapid yuan appreciation, Beijing is ignoring pledges made with other G20 powers to create a more evenly keeled global economy.
China revalued the yuan by 2.1 percent against the dollar in July 2005 and then let it rise almost 19 percent further before calling a halt in mid-2008 to help its exporters ride out the global financial and economic crisis.
The country's overall trade surplus rose during those years even with the yuan appreciation of 2005-08. It fell 34 percent in 2009 despite the re-peg, albeit in a year when trade plunged globally.
Blip or not, the timing of the trade deficit announcement is perfect for China and not for U.S. Congress members pressing for legislation to allow retaliatory duties on imports from China if Beijing refuses to alter its currency policy.
Hu attends a nuclear security summit in Washington on April 12-13, ahead of publication -- initially set for April 15 but postponed on Saturday -- of a U.S. Treasury report that could brand China a 'currency manipulator.'
President Barack Obama faces increasing pressure to protect U.S. jobs and do so by taking China more firmly to task over the price advantage it has in world markets through a currency U.S. economists say is undervalued by up to 40 percent.
Obama received at least some good news on jobs when the U.S. Labor Department said on Friday private sector employment rose in March for only the third time since recession struck in 2007. The report showed firms stepped up hiring at the fastest pace in almost three years.
NOT TO BE DISMISSED
For some if not all economists, there is little reason to dismiss China's March trade report as a freak if, as Chinese Vice-Commerce Minister Chen Jian noted on Friday, it confirms a deficit caused by a surge in imports.
'China will certainly take the opportunity to remind its G20 partners that its policy strategy has led the global recovery,' said Marco Annunziata, London-based chief economist at UniCredit bank.
'And neither will it miss the opportunity to say it is now leading the reduction of global imbalances -- and that other countries are therefore ill-placed to teach lessons or offer advice.'
Beijing has the opportunity to make the point at a bilateral level in the week after publication of its March trade data, and at a broader level when finance ministers from the G20 group of economic powers meet on April 23.
One official involved in preparations for the G20 event said that even before the March trade figures nobody was in the mood to pick a fight with China at the moment, despite a widely held view the yuan is artificially weak.
'There are other countries in the G20 that are concerned about the collateral damage that could come out of such an escalation,' said the official, who asked not to be identified.
China's economic stimulus programme is widely credited with lifting broader activity in Asia and fueling demand now driving recovery in North America and Europe.
G20 leaders agreed late last year at a summit in Pittsburgh to steer clear of any potentially protectionist measures in the year ahead, mindful failure to do that was one of the main causes of the Great Depression of the 1930s.
They also agreed to start work on what they described as a new global framework for sustainable growth, implying without ever stating explicitly that this would in part happen by an exchange rate adjustment where the yuan is pivotal.
Pressing China too hard too fast may only make a difficult job even more difficult, especially at a time when much of the economic recovery depends largely on demand from faster-growing economies, notably China, said UniCredit's Annunziata.
'China's already doing its bit to reduce global imbalances. We can only hope that the U.S. Congress does not score an own-goal at the last minute,' he said.
(Editing by Andrew Hay) Keywords: ECONOMY WEEKAHEAD/OUTLOOK (brian.love@reuters.com; +33 1 49495339; Reuters Messaging brian.love@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.