China exports to grow 13-18 per cent in 2010 /09.02.2010

THE 18 per cent year-on-year uptick in China’s exports in December 2009 will cool to a "more modest yet still healthy" year-on-year growth of 13 to 18 per cent in 2010 on the back of a global recovery, Citibank analysts say.

The country’s export value is also forecast to grow, according to Deutsche Bank analysts, who put this growth at 20 to 25 per cent for the full-year.

In the next three to five years, as the country’s economy matures, Citigroup analysts expect China’s export growth to slow to 10 to 15 per cent from the spectacular 30 per cent increase witnessed between 2002 and 2007...
But coming back to the present, the upward trend in exports may be a key reason behind the Chinese government’s decision to tighten credit control beginning with the announcement in January to increase the reserve requirement ratio (RRR) for the first time since June 2008.

The objective behind shedding the "supportive" and liberal approach for a more "cautious" credit and monetary policy is to regulate liquidity growth and bring down the probability of an asset bubble and inflation.

The preference for a "reasonable pace of credit growth" over "policy continuity" by the Chinese State Council in a document released after a meeting held in mid January, bears further testimony to the government’s resolve in this direction, said Citigroup.

The increase in the RRR itself is projected to extract CNY200 billion (US$29.2 billion) from the economy. The next step, analysts said, would be hiking policy interest rates.
The People’s Bank of China is likely to increase rates only by the second quarter of this year "to avoid widening the interest rate gap and attracting hot money inflows" with policy rates rising to 7.74 per cent by yearend, according to Citigroup estimates.

csm.hksg.com