China's export recovery adds pressure to pare stimulus measures

China's exports rose more than forecast in February and posted a third straight gain, a rebound that adds to pressure on policy makers to pare back stimulus measures adopted during the global recession.

Shipments abroad gained 46 percent in February from a year before after a 21 percent advance in January, the customs bureau reported on its website today. Year-ago figures were depressed by a contraction in world trade resulting from the crisis. The trade surplus hit a one-year low of $7.6 billion, affected in part by the Lunar New Year holiday.

The strengthening in exports may reduce excess capacity in manufacturing and contribute to price increases. Premier Wen Jiabao has cited price pressures, along with property speculation and loan quality at banks, among his top concerns for this year.

The export gain in February was more than the 38.3 percent median estimate in a Bloomberg News survey of 28 economists. Imports topped a 38 percent estimate and the trade surplus was in line with forecasts.

Central bank Governor Zhou Xiaochuan said on March 6 that policy makers must be "very cautious" in timing an exit as a world recovery isn't yet solid. Commerce Minister Chen Deming said the same day that it was too early to say that exports had recovered from the global financial crisis, and that the trade surplus for the past two months combined had contracted by 50 percent.

At the same time, Chinese authorities are also concerned at the toll that yuan appreciation may take on exporters.

A stronger yuan could help to restrain inflation. Inflows of speculative capital have also added pressure for the yuan to gain, the nation's currency regulator said yesterday.

"The yuan's appreciation should be limited to no more than 1 percent this year as costs rise," Pan Liyun, a sales executive at Zhejiang Daishan Xingfa Toys Factory, said at a trade fair in Shanghai this month. Pan said manufacturers already face pressure to pay workers higher wages.

China's gross domestic product grew 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years. After last year overtaking the US as the biggest auto market and Germany as the largest exporter, China is poised to surpass Japan this year as the second-largest economy. The nation will contribute more than a third of global growth in 2010, according to Nomura Holdings Inc.