By Bloomberg News
Dec. 10 (Bloomberg) -- China is likely to report its first gain in overseas shipments in 13 months, beginning a rebound that may encourage the world’s second-biggest exporting nation to let the yuan strengthen next year.
Exports rose 1.4 percent in November from a year earlier, according to the median estimate of 26 economists surveyed by Bloomberg News. The trade surplus swelled to $24.3 billion, the largest this year excluding seasonal distortions, tomorrow’s report in Beijing may show.
China’s exports may jump 20 percent in the first quarter of 2010 because of the global recovery and comparisons with this year’s low base, according to Macquarie Securities Ltd. and Royal Bank of Scotland Group Plc. Yuan forwards suggest that the currency will appreciate about 2.6 percent against the dollar in the next 12 months even after Premier Wen Jiabao last month rebuffed Europe’s calls for gains.
“Global political pressure for currency gains will continue to intensify,” said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. “China may begin to increase the flexibility of its currency in March or April.”
Ma forecasts a gain of as much as 5 percent against the dollar in the next year.
China had “good reason” to depreciate its currency during the global financial crisis as exports fell and chose instead to keep the yuan stable, central bank Deputy Governor Zhu Min said at a forum in Beijing yesterday. He echoed Wen’s comments to European leaders, saying a stable yuan aids a world recovery.
Return to Inflation
“We took the same policy as we did in the Asian financial crisis; we decided to stabilize the renminbi exchange rate,” the central banker said, using another word for the yuan.
November’s data may show a return to inflation as China’s economy rebounds from the slowest growth in almost a decade and food prices climb. Consumer prices rose 0.4 percent from a year earlier, the survey of economists showed.
Industrial output gained 18.2 percent, the most in more than two years, and retail sales climbed 16.5 percent, economists estimated. Banks may have extended 250 billion yuan ($36.6 billion) of local-currency loans, compared with 253 billion yuan in October.
Urban fixed-asset investment may have increased 33 percent in the first 11 months of 2009 from a year earlier as stimulus spending and unprecedented bank lending drove a recovery.
Citic Securities Co. said Dec. 8 that China’s textile and apparel companies may “outperform” as domestic sales are sustained and exports recover, recommending companies including Fujian Septwolves Industry Co., Luthai Textile Co. and Youngor Group Co.
‘Toughest Time’
“The toughest time is behind us and we expect overseas demand to continue to recover next year,” Kelly Wen, the overseas sales manager of shoe company Yaqite Industrial Co. said at the Canton Fair, China’s biggest trade show, last month.
China’s trade surplus, export gains and a currency effectively pegged to the dollar may exacerbate trade tensions. China faces U.S. tariffs on tires and European Union duties on screws and bolts and is investigating imports of U.S. autos and poultry.
China was the second-biggest exporter of goods in 2008 and is poised to overtake Germany. The Asian nation’s trade surplus was $24 billion in October.
The nation already sees itself as being at the center of world trade friction, facing 101 trade-remedy investigations in 19 countries and regions involving more than $11 billion of goods, the state-run Xinhua News Agency reported Dec. 3, citing the commerce ministry.
Trade ‘Tranquility’
Morgan Stanley’s Asia chairman Stephen Roach said that high unemployment in the U.S. and the need to win votes in congressional elections in November next year may push President Barack Obama to take tougher trade action against China.
“This is not a recipe for tranquility on trade,” Roach said in an interview in Beijing on Dec. 3.
Wen told European leaders Nov. 30 that calls for the yuan to appreciate are “unfair” as the country faces rising protectionism and a stable yuan aids the world’s recovery.
Authorities in Beijing have held the currency steady at about 6.83 against the U.S. dollar since July 2008. The yuan rose 21 percent in the three years after a fixed exchange rate was scrapped in 2005.
The International Monetary Fund says the yuan is “substantially” undervalued and Pacific Investment Management Co., which runs the world’s biggest bond fund, describes bets that China will ease controls on its currency as among the best in emerging markets.
‘Gradual’ Gains
Societe Generale SA said Dec. 8 that investors should use call options to benefit from China allowing “gradual” gains in the yuan next year as the economy recovers.
Policy makers are more likely to allow yuan appreciation for domestic economic reasons than in response to pressure from foreign governments, said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong.
Inflation pressures are building as import prices rise and “if you don’t allow the yuan to appreciate you are shooting yourself in the foot,” Lai said.
--Kevin Hamlin, Li Yanping. Editors: Paul Panckhurst, Leon Mangasarian.
To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net
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