RandomGuy
03-16-2011, 01:30 PM
It is beginning to seem as though worries about the Chinese currency being "undervalued" will be a temporary phenomena.
Given Chinese internal inflation and the fact that the raw materials they are consuming are becoming more and more expensive, including oil, I think it quite likely that they will not be needing to support their currency peg very hard in the coming years, and may be faced with problems that their currency is too strong, relative to the dollar.
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BEIJING (Reuters) - China swung to a surprise trade deficit in February of $7.3 billion, its largest in seven years, as the Lunar New Year holiday dealt an unexpectedly sharp blow to exports.
It was China's first trade deficit since March last year and its biggest since February 2004. Economists, who had forecast a small surplus of $4.95 billion, said the sudden drop was likely to prove temporary.
"We did expect exports to slow last month, but I think nobody had expected such a weak outcome," said Nie Wen, an analyst at Hwabao Trust in Shanghai.
"There is little chance that China will have a trade deficit again, and the monthly trade surplus may pick up in the second half of this year," he added.
Still, the extent of the slowdown in both exports and imports caught markets by surprise. Asian stocks tumbled on worries that monetary tightening in China and other emerging markets was taking a real chunk out of economic growth.
The deficit will at least be welcome news on two fronts for the Chinese government, helping it dampen inflationary pressure and deflect calls for faster yuan appreciation.
Cash inflows from the country's vast trade surplus over the past few years have been a root cause of China's recent run-up in prices.
Inflation reached a 28-month high of 5.1 percent in the year to November. Data due on Friday is expected to show it pulled back to 4.7 percent in February.
With tightening policies beginning to have an impact, China is confident that it can achieve its 2011 goal of holding inflation to an average of 4 percent this year, Ma Jiantang, the government's statistics chief, said on Thursday.
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http://www.reuters.com/article/2011/03/10/us-china-economy-idUSTRE7290T520110310
Given Chinese internal inflation and the fact that the raw materials they are consuming are becoming more and more expensive, including oil, I think it quite likely that they will not be needing to support their currency peg very hard in the coming years, and may be faced with problems that their currency is too strong, relative to the dollar.
--------------------------------------------
BEIJING (Reuters) - China swung to a surprise trade deficit in February of $7.3 billion, its largest in seven years, as the Lunar New Year holiday dealt an unexpectedly sharp blow to exports.
It was China's first trade deficit since March last year and its biggest since February 2004. Economists, who had forecast a small surplus of $4.95 billion, said the sudden drop was likely to prove temporary.
"We did expect exports to slow last month, but I think nobody had expected such a weak outcome," said Nie Wen, an analyst at Hwabao Trust in Shanghai.
"There is little chance that China will have a trade deficit again, and the monthly trade surplus may pick up in the second half of this year," he added.
Still, the extent of the slowdown in both exports and imports caught markets by surprise. Asian stocks tumbled on worries that monetary tightening in China and other emerging markets was taking a real chunk out of economic growth.
The deficit will at least be welcome news on two fronts for the Chinese government, helping it dampen inflationary pressure and deflect calls for faster yuan appreciation.
Cash inflows from the country's vast trade surplus over the past few years have been a root cause of China's recent run-up in prices.
Inflation reached a 28-month high of 5.1 percent in the year to November. Data due on Friday is expected to show it pulled back to 4.7 percent in February.
With tightening policies beginning to have an impact, China is confident that it can achieve its 2011 goal of holding inflation to an average of 4 percent this year, Ma Jiantang, the government's statistics chief, said on Thursday.
-------------------------
http://www.reuters.com/article/2011/03/10/us-china-economy-idUSTRE7290T520110310