China's Trade Surplus Likely to Decline on Weaker Export Growth By Nipa Piboontanasawat

China's trade surplus probably fell for the first time in almost a year in February as export growth slowed on weaker U.S. demand. The surplus declined 5 percent to $22.5 billion from a year earlier, according to the median estimate of 14 economists surveyed by a news agency, after gaining 23 percent in January. Trade figures may be released as early as today. Slower export growth may help to cool the world's fourth- biggest economy by stemming inflows of trade dollars. Premier Wen Jiabao this week named overheating and inflation as the biggest threats after six interest-rate increases in a year failed to tame prices. ``As U.S. demand fades and its negative impact on Chinese exports starts to increase, we will see economic policies shift to easing this year to secure growth and employment,'' said Wang Qing, chief China economist at Morgan Stanley in Hong Kong. Exports probably rose 19.2 percent in February, the slowest pace in 11 months, after gaining 26.7 percent in January. Besides weaker demand from a U.S. economy skirting a recession, exporters face an appreciating currency that makes their goods more expensive, cuts to incentives to export and rising production costs. The decline in the surplus may partly have been caused by the week-long Lunar New Year holiday, which started in early February this year, pushing some shipments forward to January. Snowstorms also stalled some deliveries to ports. `China's Crossroads' Wen told the National People's Congress, the legislature, this week that the government aims to cap inflation at 4.8 percent this year, the same as the actual level in 2007. Economic growth may slow to 10.5 percent in 2008 as export demand weakens, according to the State Council Development and Research Center. That compares with 11.4 percent in 2007, the fastest pace in 13 years. ``China is at a crossroads now -- the inflation risk remains on the upside but a slowing global economy threatens growth,'' said Sherman Chan, an economist at Moody's Economy.com in Sydney. ``The yuan will unlikely appreciate a lot faster than last year, given that the trade outlook has become less upbeat and weaker exports will in turn weigh on employment prospects in a country where widespread poverty is a concern.'' The yuan has appreciated about 2.7 percent against the U.S. dollar this year after rising 7 percent in 2007. China has also cut export rebates three times since the start of last year, curbing shipments including those of aluminum. For the first two months combined, the trade gap widened 6 percent to $42 billion, a survey by a News agency showed. Aluminum Exports Aluminum exports from China, the world's biggest producer of the metal, fell in 2007 to the lowest amount in five years, trade data shows, partly due to cuts to export rebates. Textile exports will probably grow at a slower pace this year because of rising costs, an appreciating yuan and a slowing U.S. economy, Xu Kunyuan, vice president of the China National Textile and Apparel Council, said last month. Money supply probably grew 17.8 percent in February from a year earlier, according to the survey, after jumping 18.9 percent in January. The central bank may release the figures next week. Imports gained 27.4 percent in February from a year earlier, according to the survey, after climbing 27.6 percent in January.