China Again

Asian Currencies Drop on Concern China Policy to Crimp Recovery
January 13, 2010, 03:29 AM EST Story Tools
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By David Yong
Jan. 13 (Bloomberg) -- Asian currencies declined, led by the Philippine peso and Malaysian ringgit, on concern China’s moves to tighten lending will cool demand for regional exports and curtail a global economic recovery.

South Korea’s won, the Indonesian rupiah, Taiwan dollar and the peso all retreated from the strongest levels in at least 16 months as Asian stocks slumped. The People’s Bank of China unexpectedly raised the amount of funds banks must set aside as reserves to 16 percent from 15.5 percent yesterday as it seeks to curb loans and inflation. The Thai baht slid after the Bank of Thailand maintained borrowing costs at a five-year low.

“The tightening in China is trimming expectations that we have more growth on the road, and markets are going to be less supported,” said Sebastien Barbe, a Hong Kong-based strategist at Calyon. “It means all the support from China in the last year is going to moderate for Asia.”

The peso weakened 0.4 percent to 45.845 per dollar as of 4:16 p.m. in Manila, according to data compiled by Bloomberg. The ringgit fell 0.3 percent to 3.3510 and the won dropped 0.2 percent to 1,125.45.

The MSCI Asia-Pacific Index of regional equities slumped 1.5 percent, the biggest loss since November. India’s Sensitive Index was little changed, while benchmarks tumbled across the remainder of Asia’s 10 biggest economies.
‘Negative Expectations’

“The speed of the policy move surprised the market,” said Hideki Hayashi, a Tokyo-based economist at Mizuho Securities Co. in Japan. “Further restrictive policy actions could create more negative expectations.”

China, including Hong Kong, accounted for 17 percent of goods shipments from Malaysia in the first 11 months of 2009, official statistics showed. Chinese trade data released Jan. 10 showed imports from Malaysia more than doubled from a year earlier in December to $4.05 billion and jumped 68 percent from Korea to $10.9 billion.Twelve-month non-deliverable yuan forwards were little changed at 6.6260 per dollar in Hong Kong. The contract earlier advanced as much as 0.4 percent on speculation the government will allow the currency to resume appreciation as part of its tightening policy. The spot rate was steady at 6.8270.
Yuan Band
China should widen the yuan’s trading band against the dollar this year to allow greater exchange-rate swings that may discourage inflows of speculative capital, Industrial Bank Co. and ING Groep NV said.

“A wider trading band will help add volatility to the yuan and defuse currency speculation,” Lu Zhengwei, chief economist at Industrial Bank, a Fuzhou-based lender, said in an interview from Shanghai. The permitted movement from the central bank’s daily fixing rate should be widened to 1 percent in the second half and to 3 percent next year from 0.5 percent now, he said.

Taiwan’s dollar fell after the central bank highlighted the benefits of capital controls in a press release late yesterday, having sent a similar document to reporters in October. The currency traded at NT$31.809 from NT$31.790 yesterday.
Taiwan Controls

The Central Bank of the Republic of China (Taiwan) sent a statement to media on the island citing comments from Joseph Stiglitz, the Nobel Prize-winning economist, that emerging- market countries should consider controlling inflows of capital.
The risk is that “the central bank will impose capital controls,” said Henry Lin, a foreign-exchange trader at Shin Kong Commercial Bank in Taipei. The local dollar could weaken to NT$32 this week, he said.

The government won’t follow Brazil’s plan of taxing foreign capital inflows because such a move would be “too slow” as time is needed to enact a law, Deputy Finance Minister Chang Sheng-ford said in a telephone interview today. “Hot money comes and goes quickly. The government should use administrative measures” instead, he said.
Thailand’s central bank today kept its seven-day repurchase rate at 1.25 percent for a sixth straight meeting, the lowest level since July 2004, as predicted by all 20 economists in a Bloomberg survey.

The baht traded at 33.05 per dollar in Bangkok, from 33.03 yesterday, when it reached 32.97, the strongest level since June 2008, according to data compiled by Bloomberg.
Elsewhere in Asian trading, Singapore’s dollar was little changed at S$1.3900 and Vietnam’s dong was at 18,479 from 18,474. The rupiah was little changed at 9,190, after earlier dropping as much as 0.4 percent to 9,213.

--With assistance from Bob Chen in Hong Kong, Chinmei Sung in Taipei and Judy Chen in Shanghai. Editors: Simon Harvey, James Regan




Why China’s unexpected export, import growth is a good sign for others
China vaulted past Germany to become the world’s biggest exporter last month as its export, import volume jumped by 18 and 56 percent. The increases are a positive sign for global trade, especially for countries that sell to China.



In this Sept. 11, 2009 file photo, cargo sits at a container terminal in the port of Dalian, China.
Elizabeth Dalziel/AP/File
Beijing
China’s surprisingly strong export and import performance in December offers further evidence of a global trade pickup, experts here say.
China’s December exports rose 18 percent from a year earlier, after dropping for 13 straight months, according to Customs figures. Imports rose even more sharply, by 56 percent.

That is good news for exporters of the sort of raw materials that China is devouring as its economic growth continues to outpace the rest of the world.
Australia, which sells the Chinese steel industry much of its iron ore, saw its exports to Beijing double in December. Chinese iron ore imports notched up their second-ever highest monthly total, and crude oil imports hit a monthly record.
The figures were also encouraging for manufacturers of the machinery that Chinese firms are buying as they channel government stimulus money into investment. Japan, Germany, South Korea, and other Asian countries such as Thailand stand to benefit from China’s buying spree.

“It seems very clear that what we are seeing are basically imports of raw materials and capital goods,” says Arthur Kroeber, head of Dragonomics, a Beijing-based economics research firm. “These are all investment-related.
“There is no sign that China is taking over from the US as the driver of demand for consumer goods,” he adds.

The Customs figures showed that China’s exports fell last year by 16 percent from their 2008 levels – the first annual drop since 1983, when economic reforms were just getting underway. But that fall was still not as steep as Germany’s, allowing China to take over the No. 1 spot in the world exporters’ league.

China’s newly reinvigorated export performance seems likely to herald fresh trade tensions with the US, which has already slapped extra tariffs on Chinese tires and steel products, which Washington deemed were being sold at unfairly low prices.
Some economists have suggested that the encouraging export figures might induce Beijing to allow its currency, the renminbi, to rise later this year. Chinese Prime Minister Wen Jiabao, however, apparently unwilling to do anything that might dent exports and thus jobs, said last month his government “absolutely would not yield” to Western calls for a revaluation of the renminbi.

December’s trade figures indicate that Chinese industrial output increased by 25 percent year on year, and that its GDP grew at an annual rate of 11 percent in the last quarter of 2009