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China’s exports rise as economy picks up

January 10 2010 - China’s exports rose in December for the first time in 14 months in an important sign of the strength of the Chinese economy that will support the case for the appreciation of the renminbi.

Exports climbed 17.7 per cent last month from a year earlier and imports shot up 55.9 per cent, according to official figures released on Sunday.

The resumption of positive export growth for the first time since October 2008 was widely expected, but both the import and export figures were much stronger than forecast. The year-on-year comparisons were inflated by the low base of the year earlier figures, which were severely depressed by the economic 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 JP Morgan.

Andy Rothman, CLSA’s chief China economist, said that the strong import numbers “are not necessarily an indication that things are doing exceptionally well in the rest of the world” noting that the year-earlier figures were down 21 per cent.

Mr Rothman 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.

He said that Beijing was unlikely to act on one month’s figures alone. But he predicted that if the export recovery continues, that would give China’s leaders the political cover they need to resume renminbi appreciation by mid-year, with a possible increase 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.

Despite 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.

State media reported on Sunday that President Hu Jintao was reported by state media to have 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”.

Beijing used stimulative fiscal policy last year dramatically to boost sales of cars in China. Largely as a result of halved purchase taxes on small cars, Chinese passenger car sales rose nearly 45 per cent last year to 10.3m, the China Passenger Car Association said at the weekend.

Total vehicle sales are estimated at 13.6m, making China the world’s largest vehicle market in the world.

However, Miao Wei, vice minister of industry and information technology, warned at the weekend that vehicle sales growth may slow to 15 per cent this year, partly because the tax break on small cars has been reduced.

Despite the tax cuts, China’s Ministry of Finance said on Sunday that fiscal revenue rose 11.7 per cent last year over 2008.

Bron: http://www.ft.com