China’s exports rose in December for the first time in 14 months, providing fresh evidence of recovery in the global economy but also placing renewed pressure on Beijing to appreciate its currency.
Following strong export figures last month from South Korea and Taiwan, China said yesterday that its exports climbed 17.7 per cent, well ahead of the modest increase that economists had predicted.
Chinese imports surged by 55.9 per cent in December, the latest indication of buoyant domestic demand in China, although the figures are also likely to increase concerns about potential inflationary pressures.
Exports to China’s two biggest markets both rebounded last month, with sales to the US increasing 15.9 per cent and to the European Union 10.2 per cent.
However, the year-on-year comparisons were inflated by the low base of the previous year’s figures, which were depressed by the economic crisis. Economists also warned that some of the improvement was the result of restocking by companies that ran down inventories during the crisis.
“While December’s export figures are encouraging . . . a recovery to pre-crisis levels appears some time away,” said Jing Ulrich, head of China equities and commodities for JPMorgan.
Andy Rothman, CLSA’s chief China economist, said that a resumption of export growth was necessary before Beijing restarted its policy of gradual appreciation of the Chinese currency, suspended over a year ago in the heat of the crisis.
Mr Rothman said that Beijing was unlikely to act on one month’s figures alone. But he forecast that if the export recovery continues, China’s leaders would have the political cover they needed to resume renminbi appreciation by mid-year, with a possible appreciation of 3 per cent for 2010.
“Beijing has been waiting for three things to happen before resuming gradual appreciation: strong economic recovery in China (which we now have); stability in the US and European economies (which we have); and several months of Chinese export growth in positive territory, which is important to sell appreciation to the domestic audience,” he said.
In spite of these growing signs of strength in the Chinese economy, Beijing also signalled at the weekend that there would be no near-term tightening in fiscal or monetary policies.
Hu Jintao, president, told a seminar attended by senior officials that China should continue “pro-active” fiscal policies and “moderately loose” monetary policies.
He said that priority should be given “to the implementation of policies that support domestic consumption expansion, economic growth, economic structure adjustments and projects concerning people’s livelihood”.