China posted a larger-than-forecast $27.1 billion October trade surplus, a day before Group of 20 leaders including Presidents Barack Obama and Hu Jintao meet in Seoul to tackle global imbalances in spending and capital flows. Exports gained 22.9 percent from a year earlier and imports rose 25.3 percent, the customs bureau said on its website today. With the surplus pumping more cash into the fastest-growing major economy, the central bank ordered some lenders to set aside more money as reserves in an effort to damp liquidity. China’s persistent trade gap and curbs on its currency fuel tension with trading partners and complicate the nation’s monetary policy as inflation accelerates. Obama said yesterday in Jakarta that G-20 leaders will “extensively” discuss trade gaps and currency restrictions hindering global growth. “The rebalancing of China’s economy has an awfully long way to go -- in fact it’s hardly even got started,” Mark Williams, an economist at Capital Economics Ltd. in London, who worked at the U.K. Treasury as an adviser on China from 2005 to 2007. “In normal circumstances, the world might be willing to wait, but not when the likes of the U.S. are struggling with very high unemployment,” he said ahead of today’s release. The surplus, the second biggest of this year, compared with the $25 billion median estimate of 27 economists surveyed by Bloomberg News. September’s excess was $16.9 billion. Soaking Up Cash China ordered some lenders, including Bank of Communications Co., to increase their reserve ratios by 50 basis points from Nov. 15, said a person with direct knowledge of the situation. A press official at the People’s Bank of China declined to comment. In October, the central bank raised reserve requirements for six banks for two months, people familiar with the matter said then. The central bank also raised interest rates for the first time since 2007. Import growth was less than analysts’ median forecast of a 28.3 percent advance. September’s increase was 24.1 percent. The gain in exports compared with a median estimate of 23 percent and September’s 25.1 percent. The yuan climbed 0.1 percent to 6.6365 per dollar as of 11:14 a.m. in Shanghai, close to the strongest level since 1993. In the lead-up to the G-20 summit, China yesterday allowed a 0.5 percent advance, the biggest gain since officials scrapped a fixed exchange rate in July 2005. ‘Stark Contrast’ The currency is up about 2.9 percent this year compared with gains of more than 12 percent for Thailand’s baht and more than 10 percent for Malaysia’s ringgit. The nation’s surplus compares with economists’ median forecast for a $45 billion U.S. trade deficit in September, data to be released today. “This stark contrast will likely add to the international pressure for China to move faster on the currency to provide more support to the global economy,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong. “Chinese exports and imports are both continuing to record impressive growth, defying concerns about weaker demand both home and abroad.” Exports rose 2.9 percent from the previous month after seasonal adjustment, the customs bureau said. Imports gained 5.6 percent on that basis. A failure by China, the No. 1 exporter, to alter its growth model to become less dependent on industry, investment and exports would be a “serious” medium-term risk to the domestic and global economies, the World Bank said last week. Lending Quota China’s central bank sells bills and raises’ banks’ reserve requirements to drain cash from the economy, seeking to contain price pressures. Policy makers have also imposed a 7.5 trillion yuan ($1.1 trillion) lending quota for the year. In addition, the currency regulator said yesterday that it would tighten controls on inflows of speculative capital. Inflation accelerated to a 4 percent annual pace in October, the fastest in two years, according to the median forecast in a Bloomberg News survey of analysts. That number is due tomorrow. Property prices rose 8.6 percent from a year earlier, the smallest gain in 10 months, as the government cracks down on speculation to limit asset-bubble risks, statistics bureau data showed today. Zhang Ping, the head of the nation’s top planning agency, said yesterday that full-year growth in consumer prices may be “slightly” above the government’s 3 percent target. The trend this quarter is worse than the government expected, Zhang said, citing “imported inflation” as excessive global liquidity and a weaker dollar push up commodity costs. --Chinmei Sung, Paul Panckhurst, Li Yanping, Luo Jun. With assistance from Jay Wang in Singapore. Editors: Paul Panckhurst, Chris Anstey. To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net. To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net

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