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Updated Thursday, March 11, 2010 11:04 am TWN, By Aileen Wang and Simon Rabinovitch, Reuters



	This photo taken on Friday, March 5, shows a general view of Yangshan deep-water port in Shanghai, China. China's exports rose in February in a new sign of growing global demand that could help persuade officials to let the Chinese currency rise. (AP) Enlarge Photo

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China trade data point to rise in yuan

“We think that Beijing will need to use all of the policy tools at its disposal to contain price pressures — both in the property market and more broadly — and expect to see policy rate hikes in coming months,” said Brian Jackson with the Royal Bank of Canada in Hong Kong.

The central bank has already started to cool demand by twice raising the proportion of deposits that banks must keep in reserve rather than lend out. Beijing wants to reduce new lending in 2010 to 7.5 trillion yuan (US$1.1 trillion) from a record 9.6 trillion in 2009.

A report in the China Securities Journal that banks made about 700 billion yuan in new loans in February, down from January's 1.39 trillion yuan, helped push bond yields modestly lower.

Traders said the reported halving of loan growth helped allay fears of further monetary tightening that had been spawned by talk of a jump in inflation. Inflation data will be issued on Thursday.

Most Chinese factories close for the long Lunar New Year holidays, which fell in February this year and in January in 2009. Combining the two months of data to try to smooth out the calendar lumps, exports rose 31.4 percent year-on-year and imports 63.6 percent.

But Lu Zhengwei, chief economist at Industrial Bank in Shanghai, said the low base of comparison with early 2009, when demand was depressed by the global credit crisis, flattered Wednesday's figures.

Adjusting the totals for changes in the number of working days and holidays, exports fell from the previous month for the second month in a row — by 2.2 percent — suggesting that the recovery in global demand was not as vigorous as imagined.

“I think the sequential figures will cool down expectations of near-term yuan appreciation before trade fully recovers,” he said.

Tom Orlik with Stone & McCarthy Research Associates in Beijing said a recovery in exports would be an illusion until demand from China's major trading partners snapped back.

Still, traders are betting that Beijing will regain enough confidence in China's economy to let the yuan resume its rise after keeping the currency pegged near 6.83 per dollar since July 2008 to help its exporters ride out the global storm.

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