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China's imports jump 45%

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1 China's imports jump 45% on Wed Mar 10, 2010 4:33 pm


China's imports jump 45%
March 10, 2010 - 3:21PM

China's trade surplus shrank to the lowest level in a year in February as a surge in imports signaled the nation may start to outshine the US as a destination for the world's goods.

Imports rose a more-than-estimated 44.7 per cent from a year ago, the customs bureau reported on its Web site today. The surplus was $US7.61 billion, and exports gained 45.7 per cent.

The diminishing surplus signals that trade may be a drag on China's expansion, a contrast with the US, where net exports contributed more to growth in the past two years than any time since the 1940s. While China's exports are also rising, policy makers indicated last week they are seeking more evidence of a sustained recovery before they will let the yuan appreciate.

''The sustained strength in China's imports is a source of support for the global economy,'' said David Cohen, an economist with Action Economics in Singapore.

Seasonal factors affected the January and February figures because of a shift in the Lunar New Year holiday to February this year from January in 2009.

The export gain in February was more than the 38.3 per cent median estimate in a Bloomberg News survey of 28 economists. Imports topped a 38 per cent estimate and the trade surplus was in line with forecasts.

Biggest exporter

China, the world's biggest exporter, is monitoring global demand as officials consider ending crisis polices that include keeping the yuan pegged to the dollar since July 2008 to aid sales in overseas markets.

Central bank Governor Zhou Xiaochuan said March 6 that policy makers must be ''very cautious'' in timing an exit as a world recovery isn't yet solid.

Twelve-month non-deliverable yuan forwards indicate the peg will break and the Chinese currency will climb about 3 per cent in the next year.

Commerce Minister Chen Deming said March 6 that the trade surplus fell 50.2 per cent in January and February from a year earlier, adding that domestic demand had boosted imports. He said it was too early to say that exports had recovered from the global financial crisis.

A stronger yuan could help to restrain inflation, which accelerated in February to the fastest pace in 16 months, according to a Bloomberg News survey of economists. The price data is due to be released tomorrow. Inflows of speculative capital have also added pressure for the yuan to gain, the nation's currency regulator said yesterday.

Toll on exporters

Still, declines in the trade surplus ''could reduce expectations of yuan appreciation,'' Alaistair Chan, an economist at Moody's Economy.com in Sydney, said in a note before today's data.

Chinese authorities are also concerned at the toll that appreciation may take on exporters, pushing up the prices of the nation's goods in overseas markets.

''The yuan's appreciation should be limited to no more than 1 per cent this year as costs rise,'' Pan Liyun, a sales executive at Zhejiang Daishan Xingfa Toys Factory, said at a trade fair in Shanghai this month. Pan said manufacturers already face pressure to pay workers higher wages.

China's gross domestic product grew 10.7 per cent in the fourth quarter from a year earlier, the fastest pace in two years. After last year overtaking the US as the biggest auto market and Germany as the largest exporter, China is poised to surpass Japan this year as the second-largest economy.

The nation will contribute more than a third of global growth in 2010, according to Nomura Holdings.

Pegged currency

China has kept its currency at about 6.8 per dollar since July 2008. Record loan growth is threatening to stoke inflation and has prompted the central bank to twice this year raise the amount of cash banks must set aside as reserves.

Persuading China to allow the yuan to climb this year is one of US President Barack Obama's stated goals. A group of 15 senators last month called for stiffer tariffs on Chinese imports, saying an undervalued currency gives Chinese exporters an unfair advantage.

The pressure came even after a turnaround in the nation's own trade figures. Net exports have contributed more than 1 per centage point to US GDP the past two years, the first time that's happened since 1946-47, Commerce Department data show. The department is scheduled to report January trade figures tomorrow.

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