Textile exports drive surging growth
Analysts say the massive trade surplus may renew pressure for a yuan revaluation
Surging textile shipments helped fuel double-digit growth in China's exports in the first two months of the year, resulting in a gross domestic product-boosting trade surplus that analysts say may soon spark renewed calls from the United States for a yuan revaluation.
Last month, China's exports rose 30.8 per cent to US$44.53 billion, while imports fell 5 per cent to US$39.92 billion, creating a trade surplus of US$4.62 billion, according to China's Ministry of Commerce website.
Last month's trade surplus was higher than the US$2.4 billion forecast by JP Morgan Chase, which also predicted a full-year surplus of US$40 billion - 25 per cent higher than last year's US$32 billion.
'The dramatic drop in imports will likely spook markets,' according to a JP Morgan Chase report.
The import fall followed a peak in February last year, when demand for commodities spiked, after which the central government introduced austerity measures to cool the economy, the report said.
For January and last month combined, the country's exports rose 36.6 per cent to US$95.28 billion, while imports rose 8.3 per cent to US$84.18 billion, creating a trade surplus of US$11.11 billion, according to the ministry.
This was a reversal from China's trade deficit of US$8 billion in the same period last year, a swing equivalent to 1.5 per cent of the nation's GDP, noted Tim Condon in an ING report. 'Given the Lunar New Year holiday, the export strength was amazing.'
A Goldman Sachs report said: 'Import growth was much weaker than expected. This might reflect slowing domestic demand and particularly fixed-asset investment.'
A key contributor to the strong export growth was a rise in China's textile exports no longer constrained by global quotas that ended on January 1, according to Goldman Sachs. 'Net exports have become a more important driver for GDP growth, judging from the strong trade surplus.'
Mr Condon predicts China's GDP growth in the first quarter to be 9.3 per cent, above the consensus forecast of 8.5 per cent.
'The trade surplus will add to China's GDP growth,' he said. 'It shows China's economy is growing strongly, and this is healthy growth.
'The Chinese authorities have successfully cooled the investment boom and inflation, as opposed to last year, which had high GDP growth coupled with a trade deficit and overheated investment growth.'
The Goldman report said China's trade surplus will continue to put upward pressure on the yuan. But the surplus has been falling from US$11.1 billion in December to US$6.5 billion in January and then US$4.6 billion last month.
ING's Mr Condon said: 'It's not the fault of China's trade surplus. The main pressure is from the US dollar. If the US dollar faces downward pressure, there will be upward pressure on the yuan.'