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China’s Exports Advance 21%, Adding Pressure on Yuan (Update2)
February 09, 2010, 11:51 PM EST
Feb. 10 (Bloomberg) -- China’s exports jumped 21 percent in January from a year earlier, providing more ammunition to trading partners calling for a stronger yuan.
Imports climbed a record 85.5 percent, according to data released by the customs bureau on its Web site today.
U.S. officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the dollar. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating that global demand is only gradually improving.
“Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting, a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.”
Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6808 per dollar as of 12:20 p.m. in Hong Kong. Also today, an editorial in the state-owned China Securities Journal said that the currency may not have “big gains” in the first half because economic conditions haven’t improved.
Stocks pared gains after the trade release, with the MSCI Asia Pacific index up 0.3 percent as of 12:10 p.m. in Hong Kong after earlier rising as much as 0.8 percent.
China’s export gain was the biggest since September 2008. It compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. The trade surplus of $14.17 billion fell short of economists’ $20 billion forecast.
Imports rose by the most since Bloomberg data began in 1991.
Fastest-Growing Economy
The week-long lunar holiday was in January last year and February in 2010.
The “positive trend remains intact,” and today’s report bolsters the case for the government to tighten policies and let the yuan strengthen in coming months, said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong.
The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains against the dollar would also help China to restrain inflation.
China last year overtook Germany as the world’s largest exporter, the German statistics office confirmed yesterday. Germany itself is benefitting from the expansion of China’s market, with its BGA wholesale and export federation projecting a 10 percent gain in shipments abroad in 2010, propelled by Chinese demand.
Arms Sales, Chickens
In Taiwan, government figures this week showed the biggest gain in its exports in more than 30 years on spending in China before the lunar holiday.
Comparisons from a year earlier are also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent.
China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama. On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.”
The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain.
Economic Acceleration
Gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S.
“It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today.
Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said.
Jiangsu’s Wage Boost
Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers.
Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang, the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy.
--Sophie Leung, Li Yanping, Kevin Hamlin. Editors: Paul Panckhurst, Lily Nonomiya.
To contact the reporter on this story: Sophie Leung in Hong Kong at +852-2977-6126 or [email protected]
To contact the editor responsible for this story: Chris Anstey at +65-6212-1130 or [email protected]
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