Chinese exports jump unexpectedly amid inflation fears

Cyclist passes containers at Longtan port in Nanjing Exports by China just keep piling up and up

China reported much stronger than expected export growth in November, adding to inflation fears.

Exports were up 34.9% versus a year earlier, compared with an expected 25%. In October the increase was only 22.9%.

Imports also rose rapidly, up 37.7%, but not enough to stop the country's controversial trade surplus widening by 15% from a year ago to almost $23bn.

November's inflation figure - to be released on Saturday - is set to hit a new 28-month high of 5.1%, reports say.

That would be a further jump from October's inflation figure of 4.4%, and well above the official inflation target of 3%.

Cooling measures

The rising inflation prompted China's central bank to increase the amount of cash that banks are required to keep on deposit with the central bank on Friday for the sixth time this year.

The higher reserve requirement will limit the banks' ability to make new loans, slowing the economy.

The People's Bank of China has already raised interest rates and increased banks' reserve requirements several times in a bid to cool inflation, while the government has taken emergency measures to address exceptional price rises and shortages of some foods.

"There's been a great deal of nervousness basically all year about the risk of overheating," said Michael Pettis, an economist at Beijing University, speaking to the BBC.

"Since much of the inflation is food inflation... [it] represents a transfer of income from the poor to the rich," he noted.

He said markets expected the central bank's latest move to be followed by another interest rate rise in the coming week, and perhaps as soon as this weekend.

Property peaking?

However, Mr Pettis said he thought inflation may already be peaking for now.

Other data released on Friday show that the authorities are succeeding in tackling house price inflation.

Property prices rose 7.7% in November, down from 8.6% in October.

The government has introduced a plethora of measures to cut back on property speculators, fearful that China's loose monetary policy was encouraging a bubble.

Despite the slowdown, the data also showed that real estate investment rose a healthy 37% in the month from a year earlier.

Surplus sensitivity

The trade figures showed export demand grew particularly strongly in developing markets, led by Russia (up 73%) and South Africa (up 48%).

However, these countries still comprise a relatively small share of Chinese trade, and more important to the overall figure was a 33% rise in exports to Europe. Exports to the US were up 29.5%.

Many US politicians and economists accuse China of manipulating the value of the yuan in order to boost its net exports at the expense of its trading partners.

A bill is set to go before the Senate that would call for retaliatory trade sanctions against countries such as China that intervene to weaken their currencies.

China relaxed the yuan's fixed exchange rate against the dollar in June, but since then it has been allowed to appreciate by less than 3%.

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