Asia Economics Data Flash July 10,2006 Goldman Sachs Asia Economics Research Group Hong Liang, Helen (Hong) Qiao, Eva Yi +85229781941 GSGLOBALECONOMICWEBSITE Economic Research from the GSInstitutional Portal at Important disclosures appear at the back of this document China Trade Data: Trade Surplus Hits an All Time High Exhibit 1: Table of trade data ` Jun May Apr Mar Feb Jan Exports % yoy 23.325.123.818.104.22.168 % qoq (sa, ann) 15.829.424.242.030.527.0 % m om (sa) 2.52.3 -1.87.3 -4.59.3 Imports % yoy 18.921.615.521.329.525.4 % qoq (sa, ann) -2.3 -0.211.924.328.425.4 % m om (sa) 1.34.0 -2.9 -22.214.171.124 Trade Balance (USD bn) 14.513.010.5126.96.36.199 Source: General Administration of Customs, CEIC, Goldman Sachs Research estimates. Export growth showed signs of moderation in June. June export growth softened to 23.3% year on year (yoy), down from 25.1% yoy in May. On a seasonally-adjusted; quarter-on-quarter (qoq), annualized basis, export momentum slowed to 15.8% qoq, down from 29.4% qoq. Imports growth also softened to 18.9% yoy in June, down from 21.6%% yoy in May. Sequential momentum of imports slowed further to -2.3% qoq, down from -0.2% qoq. The trade surplus reached an all time high of US$14.5 billion, breaking last month’s record of US$13 billion. The total trade surplus in the first half of the year reached US$61 billion, compared with US$39 billion in the same period last year, or a 55% increase yoy. Persistently large trade surpluses confirm our view that the renminbi remains significantly undervalued. We believe the continued widening of the trade surplus has not only left the spot light on China’s exchange rate policy, but also highlighted the awkwardness of tightening policies that tend to exacerbate China's external imbalances. Risk again rises for a weaker import demand from China in the near term on the back of recent policy tightening measures that try to slow down domestic investment. Exhibit 2: Headline trade growth -20 -10 0 10 20 30 40 50 60 70 80 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 -12 -6 0 6 12 18 24 30 36 42 48 Trade balance (RHS) Exports Imports US$ bn% chg yoy Source: CEIC, Goldman Sachs Research estimates. 2 Global product; distributing entities The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. 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