China's trade surplus widens in June on slowing imports

Chinese trade figures set to disappoint

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China's trade surplus widened in June as import growth weakened, underscoring worries about both the domestic and global economy.

The trade surplus grew to $31.73bn (£20.46bn), up 42.9% from the same month last year, the customs bureau said.

The main contributor was weak imports which grew by 6.3%, about half the pace analysts had been expecting.

China's domestic economy has been one of the major drivers of global growth.

Trade conflict

China's trade surplus with the US and other countries has pitted it against its trading partners in recent years.

China has been a massive exporter of cheap goods and the country has been accused by some in the US of keeping its currency, the yuan, undervalued, giving it a competitive advantage.

The allegations of "currency manipulation" are a subject of heated debate in the US election campaign this year, with some criticising the current administration for being too soft on China.

"A large trade surplus continues to put pressure on the yuan to appreciate, otherwise there may be trade sanctions from trading partners and a conflict with the United States," said Li-gang Liu from ANZ in Hong Kong.

China has allowed the yuan to appreciate at a very gradual pace. However, critics say it is still undervalued.

Domestic worries

The latest trade data out on Tuesday have also highlighted recent concerns that slowing demand from Europe and the US will hurt the Chinese economy.

Exports beat analysts' expectations, rising by 11.3%. However, that is still slower than growth of 15.3% in May.

The data comes days after the Chinese Premier Wen Jiabao said China faced "relatively large" downward pressures.

Mr Wen also said authorities would intensify their response to any economic slowdown and encouraged exporters to explore markets in Asia.

Last week, in a surprise move, the government cut borrowing costs for the second time in a month, raising concerns China may have recorded weaker growth than expected in the second quarter.

The official government report is due on Friday, and will include China's gross domestic product, fixed asset investment and industrial production.

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