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A month later than the optimists hoped for but a quarter ahead of what pessimists feared in December  China’s exports recorded their first year-to-year increase in 14 months. The 17.7% growth in exports from December 2008 puts China on track to allowing its currency to gradually appreciate against the U.S. dollar by mid-2010. China re-pegged the renminbi to the dollar in July 2008 in an effort to revive falling exports.  

A resumption in export growth is just one item in a three-item checklist for a return to gradual renminbi appreciation.

 The list also includes evidence of a strong economic recovery in China and stability in the U.S and European economies.

The resumption of export growth had been widely expected by economists who differed over the “when” and not the “if.”

But few had projected that Chinese imports would surge at the same time—or at least not to the degree that they did in December. Imports in that month climbed by almost 56% from December 2008. The big beneficiaries were China’s Asian trading partners Korea and Taiwan. Surprisingly strong domestic demand from Chinese consumers is driving the surge in imports.

What’s not surprising is that the news on exports pushed up the price of commodities—copper is up almost 3% in London this morning-and commodity stocks—BHP Billiton (BHP) is up 1.2% in London.

It will take a few more months of solid export growth before Beijing removes the renminbi-dollar peg and returns to a policy of controlled currency appreciation. A return to gradual appreciation is likely to mean appreciation of about 3% for the renminbi against the U.S. dollar by the end of 2010.