China’s exports rose more than forecast in February and property prices jumped the most in almost two years, adding pressure on policy makers to pare stimulus measures adopted during the global recession.
Shipments abroad gained 46 per cent in February from a year before after a 21 per cent advance in January, the customs bureau reported on its Web site today. Commercial and residential property prices in 70 cities climbed 10.7 per cent, the statistics bureau said separately.
Inflation may have accelerated to 2.5 per cent, the fastest pace in 16 months, according to the median estimate in a Bloomberg News survey of economists ahead of data to be released tomorrow. Central bank Governor Zhou Xiaochuan said March 6 that while anti-crisis policies must end “sooner or later,” China needs to be cautious in timing an exit because a global recovery isn’t yet solid.
“The rapid rise in exports will add to inflationary pressure and reinforce the arguments for domestic policy tightening,” said Ma Jun, Hong Kong-based chief China economist with Deutsche Bank AG. “Overheating in the domestic economy has led to stronger imports of commodities — so we have strong export-demand recovery as well as domestic overheating.”
Year-ago export and import figures were depressed by a contraction in world trade resulting from the global crisis. China’s economic data is also distorted by a weeklong holiday, celebrated in January last year and February in 2010. Premier Wen Jiabao cited price pressures, along with property speculation and loan quality at banks, among his top concerns for this year in a March 5 annual speech to lawmakers.
The Shanghai Composite Index closed 0.7 per cent lower on concern that the central bank may raise interest rates to cool the economy. Twelve-month non-deliverable yuan forwards were little changed at 5 pm in Hong Kong. The contracts indicate that traders expect the yuan’s peg to the dollar will break and the currency will climb about 2.9 per cent in the next year.
The cities of Haikou and Sanya on the southern island of Hainan led the gains for new-home prices.
The property numbers may imply “more upward pressure on inflation” from housing costs, said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong. He forecasts extra administrative curbs in the real-estate market, more increases in the reserve-ratio requirement for banks, and higher benchmark interest rates as early as this month.
Imports rose 45 per cent after an 86 per cent jump in January, underscoring China’s rising role as a driver of global growth. Gains in imports and exports topped economists’ median forecasts, while the trade surplus of $7.6 billion, a one-year low, was in line with estimates.
Policy makers indicated last week they are seeking more evidence of a sustained export recovery before they will let the yuan appreciate. Wen’s government has prevented any rise in the currency against the dollar since July 2008 to aid exporters amid the trade collapse and worst global recession in the postwar era.
Commerce Minister Chen Deming said March 6 that it was too early to say that exports had recovered from the global financial crisis.
The central bank so far has limited its tightening to ordering banks to hold more cash in reserve and advising lenders to rein in credit expansion. The People’s Bank of China may start raising interest rates as soon as this month as its next step, according to Wang Qian, an economist with JPMorgan Chase & Co in Hong Kong.
While February’s inflation was likely exaggerated by the seasonal factors, economists project the momentum to continue, sending the rate to as high as 4.4 per cent during the year, a survey showed last week. In January, consumer prices rose 1.5 per cent, the third monthly increase after a nine-month run of deflation.
Baoshan Iron & Steel Co, China’s biggest publicly traded steelmaker, increased prices for March delivery as much as 7.4 per cent because of higher demand and raw material costs. Kweichow Moutai Co, China’s biggest producer of spirits by market value, has also pushed up prices.
