China posted a trade surplus of $22.9 billion in November, raising the stakes before a high-level U.S. delegation arrives in Beijing for talks expected to focus on the political repercussions of the swelling surplus.
The surplus, just shy of October's record $23.8 billion, was more than double the November 2005 figure of $10.5 billion and beat the $20.1 billion median forecast of economists polled by Reuters.
"This is very strong. It highlights China's competitiveness and strength as the world's factory," said Dong Tao, senior economist with Credit Suisse in Hong Kong. "It probably also illustrates that U.S. consumer demand may not be as weak as the market anticipates," he added.
Exports grew 32.8% from a year earlier in November, exceeding economists' forecasts of 28.3%; annual import growth stood at 18.3%, compared with a forecast of 16.0%.
Kent Yau, economist with Core Pacific-Yamaichi in Hong Kong, said that China might allow the yuan to appreciate a bit further in response to U.S. pressure, but that it would keep its own interests in mind when setting such policy. "Obviously it's not going to solve the problem of the trade surplus, but its going to hurt some exporters running on thin margins," Yau said.
China has allowed the yuan to appreciate by around 3.45% since it revalued the currency by 2.1% in July 2005, but U.S. critics maintain that the yuan remains vastly undervalued, giving Chinese exports an unfair advantage in global markets.
U.S. Treasury Secretary Henry Paulson leads the U.S. delegation to Beijing for talks on Thursday and Friday as part of a strategic economic dialogue between the two countries.
In an exclusive interview on CNBC, Paulson said China must move quickly to a market economy to remain competitive.
Paulson, who is traveling to China with Federal Reserve Chairman Ben Bernanke to discuss trade and economic issues, told Maria Bartiromo that "a big part of the dialog is to persuade the Chinese to accelerate the pace of their reform...There's total agreement about what they need to do so the question, the debate is about timing."