China's trade surplus for all of 2007 jumped by 47.7 percent to a record $262.2 billion, but detailed figures released on Friday suggested that policies to reduce the imbalance are starting to bear fruit.
The surplus for December alone came in at $22.7 billion, below forecasts of $24.5 billion and November's $26.3 billion, while imports grew faster than exports for the third month in a row.
Record nominal high oil prices partly explain the recent buoyancy of imports, but for 2007 as a whole export growth slowed by 1.5 percentage points while import growth picked up by 0.9 percentage points.
"The smaller surplus is largely welcome, and it presents a modest argument for the Chinese government that their efforts to reduce the trade balance are beginning to work," said Jun Ma, chief China economist at Deutsche Bank in Hong Kong.
The government has introduced a slew of measures to cut the surplus, which is swamping the banking system with surplus cash and has been drawing the ire of the United States and the European Union.
As well as letting the yuan rise more swiftly -- as demanded by Washington and Brussels -- Beijing has reduced tax refunds on about a third of export lines. It has also slapped export taxes on goods such as steel and scrapped import duties on other items.
"Overall export growth started to slow down in the second half of 2007 and import growth accelerated significantly. The trend of a rapidly expanding trade surplus has been effectively contained, and policy adjustments have achieved initial results," the customs administration said in a statement.
A telling sign that growth in the surplus is losing momentum is the rolling 12-month sum, which gives a good view of the underlying trend by ironing out seasonal fluctuations caused by holidays and other factors.
The full-year surplus of $262.2 billion was just $1.9 billion more than the total in the 12 months to November, which had been $4.4 billion more than in the 12 months to October.
A big question mark next to the trade outlook is how great a toll a recession in America would take on Chinese exports.
Chen Jijun, an economist at CITIC Securities in Beijing, said he expected growth in the surplus to slow to a range of 20-30 percent in 2008. But Zhao Qingming, an economist at China Construction Bank in Beijing, said the surplus for the year could end up little changed at $260 billion.
"Looking forward, China's exports are bound to expand by a much slower clip as policies to curb exports start to bite more as time goes on, as external demand sags in the wake of a global economic slowdown and as the yuan rises," Zhao said.