It quite likely puts off any move to allow its currency to appreciate against the U.S. dollar, but news that China’s imports were up 45% in February 2010 from February 2009 is great news for the still struggling economies of the developed world.
Growth in China’s exports at 46% over the last 12 months wasn’t strong enough to keep China’s trade surplus from shrinking to just $7.6 billion in February. The total trade surplus for January and February was down 50% from the same two months in 2009. (Looking at the two months together eliminates the effect of the changing timing of the weeklong Lunar New Year holiday, which fell in January in 2009 and in February in 2010.
Chinese officials, including Zhou Xiaochuan, governor of the People’s Bank of China, the country’s central bank, have been very clear in recent weeks to link any change in the renminbi/U.S. dollar peg to a sustained recovery in China’s exports. By pegging the currency to the dollar since July 2008, China has given its exporters an edge: when the dollar fell, as it did for most of that period, so did the renminbi, making Chinese goods cheaper to non-dollar, non-renminbi customers.
The good news in rising Chinese imports is that they give a boost to the economic recovery in the United States and Europe.
According to the Commerce Department, rising net exports have contributed more than a percentage point to U.S. GDP growth in the past two years.
The United States is due to report its own trade figures today, March 10. (China will report inflation numbers at 9 p.m. ET on March 10. Allowing the renminbi to appreciate would help fight inflation in China. Watch that inflation number to see how a shrinking trade surplus and rising inflation net out for the renminbi/dollar peg.)