At the end of last year, China reported that its CPI had turned positive from a year over-over-basis. Deflation had ended. Last week, the PBOC allowed the three month bill yield to rise for the first time. This small nuanced move, that will likely be reaffirmed with the 1-year bill sale this week, is a small token move and of greater symbolism than substance. Coupled with today’s news that exports also returned to growth on a year-over-year basis (first time in 14 months), you get speculation of yuan appreciation. This is evident in the 12-month forwards. Chinese officials appreciate the base effect that will flatter the data and is unlikely to act in the near-term to engineer a stronger yuan. The real importance of the strength of the Chinese economy is not so much its exports, but the import side. Imports surged almost 56% year-over-year. Imports from Australia and Malaysia, for example, have doubled. The strength of Chinese imports will help support numerous economies in the region and commodity producers including South Africa and Brazil.
China China Reviewed by magonomics on January 11, 2010 Rating: 5
Powered by Blogger.