China trade surplus shrinks

China reported Monday thatits December exports rose by 17.9 per cent from a year earlier, to $154 billion, but its overall trade surplus shrank.

Exports outstripped imports to produce a surplus with the rest of the world of $13.1 billion US, which wasless that November's 34.9 per cent surge.

Still, the size of the surpluscould still fuel tension with the U.S. ahead of Chinese President Hu Jintao's visit to Washington next week.

Analysts said the decline was likely to be temporary and the gap should rebound later in the year.

Hu will meet with President Barack Obama on Jan. 19. The White House says Obama will pressHu over currency controls that critics say are swelling China's trade surplus and wiping out jobs abroad.

Voter anger over the large and rising U.S. trade deficit with China became an issue in the Octoberelections in the U.S.

"Surely the ongoing Chinese surplus with the U.S. and the world will be a point of contention" during Hu's visit, said economist David Cohen at Action Economics in Singapore.

But the smaller surplus was caused partly by a temporary spike in the price of imported oil and other commodities even though the amounts imported declined, said Mark Williams of Capital Economics. He said this effect should pass quickly.

Surplus to rebound in 2011

"We expect China's surplus to rebound in 2011," Williams said in a report.

The decline from November's sharp trade growth was in line with forecasts by economists who said the jump was temporary and Christmas-related.

December export growth was below the 20 per cent forecast by many analysts but still reflected reviving global demand.

"Growth probably will be under 20 per cent going forward, but something in this range is sustainable if the global recovery continues," Cohen said.

Critics say the undervalued yuan gives China's exporters an unfair price advantage and hurts foreign competitors by making their goods more expensive in the Chinese market.

"The narrowing trade surplus last month is unlikely to subdue U.S. policymaker criticism of China's pro-exports policies," Moody's Analytics economist Matt Robinson said in a report.

Beijing promised more exchange rate flexibility in June and the yuan has risen by about 3.5 per cent against the U.S. dollar since then.

Analysts expect the currency to rise by aboutfive per cent this year, but this is too little for critics who say the yuan is undervalued by up to 40 per cent.