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No Signs of China's Slowdown
02/10/2010 2:53 pm EST
China’s imports jumped a record 86% in January from the same month in 2009. This increase, the third straight monthly climb, far outstripped a 21% increase in exports. The growth in exports, however, was the second monthly increase after 13 monthly declines.
One great big caveat—with lion dancers and firecrackers: Lunar New Year, which fell in January last year, falls in February in 2010. So, a lot of economic activity that was postponed by the holiday last year wound up in January’s monthly numbers this year. (For more on the Lunar New Year’s effect, see this recent post.)
The jump in Chinese imports is a boon for China’s trading partners from next door to across the globe. Taiwan posted its biggest jump in exports in 30 years in January. China’s imports from Germany climbed by 50% in the month from January 2009.
Import growth will eclipse export growth for all of 2010, according to Nomura Holdings. The investment company projects that China’s imports will grow by 20% in 2010 and exports will increase by 11%.
Because of the distorting influence of the Lunar New Year policy and because the Beijing government is inherently and rightfully cautious about doing anything that might damage growth, I don’t expect these numbers to lead to any immediate change in China’s currency policy.
And Beijing is still waiting to see what effect its most recent commands to suspend bank lending will have on an economy that after reporting 10.7% growth in the fourth quarter of 2009 showed signs of overheating. (For more on how command economics work and don’t work in China, see this post.)
I still think the most likely timing of any change—from a decision to end an absolute renminbi-US dollar currency peg to more shifts favoring domestic consumption—is in the days after the March meeting of the National Peoples Congress and before the state visit of China’s leaders to Washington, now scheduled for April.
Full disclosure: I don’t own shares of any company mentioned in this post.
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