Chinese exporters start new year with a boom

China saw exports jump 45.7 per cent last month, but the growth may not last.

BEIJING // China's exports increased by almost half last month, although warnings have been sounded that growth could slow later this year. But analysts believe Beijing will resist pressure for a substantial revaluation of the yuan in the wake of last month's 45.7 per cent jump in exports compared with a year earlier, although they said a small-scale appreciation was likely.

The latest figures were above expectations, with analysts having predicted an increase of between 35 and 40 per cent. Just as exports boomed last month, so did the imports of the world's most populous nation, showing a 44.7 per cent rise. This reflected heavy demand for goods as China continues to recover rapidly from the global economic crisis. While they were balanced against a 25.7 per cent drop in the same month of last year, the latest month's figures were negatively affected by the long Lunar New Year holidays, which came mid-month.

Ren Xianfang, a Beijing-based analyst at IHS Global Insight, said any appreciation of the Chinese currency was likely to be "small and incremental". China has been pressured over its currency by trading partners such as the US, which believe that China is giving its exporters an unfair advantage by keeping the value of the yuan artificially low. The yuan has been kept steady against the dollar for the past 18 months.

However, Miss Ren warned that the growth in exports "was not as robust as the government hoped" and this made substantial revaluation unlikely. "There could be some headwinds down the road when the global restocking ends," she said, adding that a predicted slowing of demand in the US was a particular concern. "We think that could hit some time in the second half [of 2010]. The headwinds could prevent the Chinese government from introducing more aggressive policies to revalue the currency.

"But because of these pressures from the US, political pressures and inflationary pressures, the government does have to take some steps towards that direction." Another analyst, Zhu Jianfang, an economist for Citic Securities in the Chinese capital, said China's exports were "extending" the country's recovery and made the revaluation of the yuan more likely. The governor of China's central bank, Zhou Xiaochuan, said last weekend that China was "very cautious" about easing exchange-rate controls because of the uncertain global economic outlook.

Looking ahead, Miss Ren said increases in savings rates in the US were another negative factor on China's export growth, while Tom Orlik, a Beijing analyst for Stone and McCarthy Research Associates, said in a report that "stubbornly high" unemployment in the US and EU would also have an impact. A combination of figures from the first two month of this year shows that imports increased 31.4 per cent compared with the same period last year. This combined figure, according to analysts, was a more accurate indicator of the health of China's export trade than last month's data alone.

China's global trade surplus was US$7.6 billion (Dh27.91bn) last month, and the combined surplus for January and February was $21.8bn. * with Associated Press [e-mail]