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Chinese exports surged 21.8 per cent in February. After a surge the previous month, Jan-Feb exports are up 23.6 per cent.This happens at a time when exports for Taiwan and Korea fell. Societe Generale’s Wei Yao writes that the difference stemmed from a surge in Chinese exports to the EU (up 15.2 per cent) and the U.S. (up 14.4 per cent) in February.
Part of this is cause of stronger exports from Taiwan and Korea in February 2012, but part of this was because China regained a larger market share. But there’s also another theory floating about.
“The bewilderingly solid export data might be the result of disguised capital inflows, as exporters could overstate export amount in order to move more yuan into the mainland,” writes Yao, but she doesn’t ascribe to this theory just yet.
But if the export figures are accurate, are such strong numbers actually good for China? Not really according to Yao.
“…we think such strong exports may turn out to be more of a curse than a blessing for China. Against the backdrop of a meager global recovery and heightened concerns over potential currency wars, China’s bi-lateral trade surplus with the US, as suggested by Chinese data, reached a record high in four years; and China snatched market shares from neighbours. None of these will be the most welcomed development. Particularly, there is evidence that the People’s Bank of China has been intervening to keep the yuan from appreciating.”
Remember, American policymakers frequently accuse China of artificially weakening its currency to boost exports. Significant yuan depreciation could also cause investors to flee the offshore yuan market.