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Monday 15 March 2010
Yuan may not follow China trade bounce
China’s better than expected trade results, released yesterday, prompted speculation that a revaluation of the currency may come soon but analysts have warned that this may not be the case.
Latest numbers may not present full picture, revaluation not likely soon
By MALMINDERJIT SINGH 11 March 2010
China’s better than expected trade results, released yesterday, prompted speculation that a revaluation of the currency may come soon but analysts have warned that this may not be the case.
Exports in February stood at US$94.52 billion, up 45.7 per cent, while imports rose 44.7 per cent to US$86.91 billion. The surge in exports saw China record a trade surplus of US$7.6 billion in February, compared with US$14.2 billion in January, reported Reuters. The statistics released exceeded economists’ predictions for US$8.0 billion surplus based on a 38.7 per cent rise in exports and a 39.7 per cent rise in imports from February last year.
Jun Ma, chief China economist at Deutsche Bank in Hong Kong, told Reuters that the data cemented his view that exports in 2010 could surge 30 per cent, dwarfing Beijing’s forecast of an 8 per cent rise. ‘Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening,’ Mr. Ma said.
Ren Xianfang, an economist at IHS Global Insight in Beijing, told AFP that this development ‘will give China’s government more confidence to start revaluing the yuan’.
However, the General Administration of Customs explained that since February 2010 had fewer working days due to the Chinese New Year holiday, it combined data from January and February to provide a more accurate reflection of the actual trade conditions. Using this methodology, exports surged 31.4 per cent to US$204 billion in the first two months over the same period last year and imports stood at US$182.3 billion, up 63.6 per cent, reported Xinhua.
This prompted some economists to advise caution from being too optimistic about the data released.
Also, as Lu Zhengwei, chief economist at Industrial Bank in Shanghai, told Reuters, the low base of comparison with early 2009, when demand was depressed by the global credit crisis, flattered yesterday’s figures. Adjusting the totals for changes in the number of working days and holidays, exports fell from the previous month for the second month in a row - by 2.2 per cent - suggesting that the recovery in global demand was not as vigorous as imagined.
‘I think the sequential figures will cool down expectations of near-term yuan appreciation before trade fully recovers,’ said Mr. Lu.
As China’s two largest trading partners, the European Union and the United States, continue to face high unemployment rates and domestic economic uncertainty, it may be some time before China’s trade increases to levels that may force policy-makers to consider revaluing the yuan.
‘Although China’s exports have regained momentum since the beginning of this year, it would take two or three years for exports to return to the level of 2008, as global recovery is still haunted by uncertainties,’ Chinese Commerce Minister Chen Deming said on Saturday.
The data did not have a deep impact on market reaction except on commodity-linked currencies as China’s economic growth supports its large appetite for commodity imports. The Australian dollar rose as far as US$0.9171, its highest since Jan 20, according to Reuters data, while the New Zealand dollar rose 0.6 per cent to a three-week high of US$0.7076.
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Yuan may not follow China trade bounce
Latest numbers may not present full picture, revaluation not likely soon
By MALMINDERJIT SINGH
11 March 2010
China’s better than expected trade results, released yesterday, prompted speculation that a revaluation of the currency may come soon but analysts have warned that this may not be the case.
Exports in February stood at US$94.52 billion, up 45.7 per cent, while imports rose 44.7 per cent to US$86.91 billion. The surge in exports saw China record a trade surplus of US$7.6 billion in February, compared with US$14.2 billion in January, reported Reuters. The statistics released exceeded economists’ predictions for US$8.0 billion surplus based on a 38.7 per cent rise in exports and a 39.7 per cent rise in imports from February last year.
Jun Ma, chief China economist at Deutsche Bank in Hong Kong, told Reuters that the data cemented his view that exports in 2010 could surge 30 per cent, dwarfing Beijing’s forecast of an 8 per cent rise. ‘Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening,’ Mr. Ma said.
Ren Xianfang, an economist at IHS Global Insight in Beijing, told AFP that this development ‘will give China’s government more confidence to start revaluing the yuan’.
However, the General Administration of Customs explained that since February 2010 had fewer working days due to the Chinese New Year holiday, it combined data from January and February to provide a more accurate reflection of the actual trade conditions. Using this methodology, exports surged 31.4 per cent to US$204 billion in the first two months over the same period last year and imports stood at US$182.3 billion, up 63.6 per cent, reported Xinhua.
This prompted some economists to advise caution from being too optimistic about the data released.
Also, as Lu Zhengwei, chief economist at Industrial Bank in Shanghai, told Reuters, the low base of comparison with early 2009, when demand was depressed by the global credit crisis, flattered yesterday’s figures. Adjusting the totals for changes in the number of working days and holidays, exports fell from the previous month for the second month in a row - by 2.2 per cent - suggesting that the recovery in global demand was not as vigorous as imagined.
‘I think the sequential figures will cool down expectations of near-term yuan appreciation before trade fully recovers,’ said Mr. Lu.
As China’s two largest trading partners, the European Union and the United States, continue to face high unemployment rates and domestic economic uncertainty, it may be some time before China’s trade increases to levels that may force policy-makers to consider revaluing the yuan.
‘Although China’s exports have regained momentum since the beginning of this year, it would take two or three years for exports to return to the level of 2008, as global recovery is still haunted by uncertainties,’ Chinese Commerce Minister Chen Deming said on Saturday.
The data did not have a deep impact on market reaction except on commodity-linked currencies as China’s economic growth supports its large appetite for commodity imports. The Australian dollar rose as far as US$0.9171, its highest since Jan 20, according to Reuters data, while the New Zealand dollar rose 0.6 per cent to a three-week high of US$0.7076.
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