Among other positive signs for the global economy, the International Monetary Fund has said it will probably raise its estimate for 2010 world growth from 3.1 percent. European executive and consumer confidence jumped in December to a level last seen before the demise of Lehman Brothers Holdings Inc. in 2008, a report showed last week.
For the full year, China's exports fell 16 percent and imports declined 11.2 percent. The trade surplus was $196.1 billion, sliding for the first time since 2003 and falling short of 2008's record $295.5 billion.
December's numbers show the slump is over for China's exporters, Huang Guohua, a statistics official with the customs bureau, said yesterday in an interview broadcast on state television. That comment contrasts with Chinese leaders saying in the past month that the economic recoveries of China and the world are not yet on solid foundations.
Chinese imports are being boosted by the nation's economic acceleration, manufacturers buying materials for processing into exports, and an increase in commodity prices. On the nation's east coast, Qingdao Port Group Co. is expanding wharves to handle iron-ore imports.
Eoin Treacy's view The positive effect on the Chinese economy of last year's massive stimulus package will be no surprise for veteran subscribers. The resurgence of activity in China's export sector is a positive signal both for the mainland's economy and for those that depend on exports to China. Today's announcement has thrown greater focus on the potential for China to allow the Yuan to appreciate once again, particularly against the US Dollar.
The re-pegging of the Yuan to the US Dollar saw the currency appreciate in the 2008, which undoubtedly contributed to the worsening of the slowdown in China's manufacturing sector. However, as a result of the peg, the Yuan topped early last year and remains in a medium-term downtrend against most currencies. The weakening of the currency over the last year is contributing to the erosion of the post-Lehman competitive advantage enjoyed by some of China's neighbouring economies. For example the Singapore Dollar has regained the majority of the 2008 decline. The Indian Rupee, Korean Won and Taiwan Dollar bottomed against the Yuan last year and remain in relatively consistent uptrends.
Today's figures are a positive for the global economy but do not necessarily imply that the Yuan will be moved back to a peg against a basket of currencies rather than solely against the US Dollar. A more immediate risk of a revaluation of the Yuan would be likely if the export sector were overheating, but this is an unlikely prospect in the short term.
China's naysayers have focused on the slow down of the Chinese manufacturing sector as evidence of profound economic difficulties. This article by David Barboza for the New York Times, focusing on the views of James Chanos, is a case in point. There is little doubt that the Chinese economy is prone to excesses, whether these are infrastructure, property or stock market led. However, there is no denying that the Chinese economy has just come through one of the deepest global recessions ever in relatively good health, particularly when compared to the USA or Europe. China will inevitably go through economic problems on its development path, but this would appear to be more of a medium to longer term risk rather than a short-term one.