BEIJING, Feb. 23, 2010 (Xinhua News Agency) -- China has raised reserve requirement ratio twice since January, and market is guessing whether the interest rate hike will be followed. Market observers here can judge the time for rate adjustment from export growth, commodity futures prices and pork price growth. --- Export growth China's export value reached 109.47 billion US dollars in January, up 21 percent year on year, achieving positive growth for the second month running after more than one year of negative growth. Foreign trade has significant impact on CPI. Firstly, Chinese traders' pricing ability is not strong in overseas businesses. Therefore, rapid growth of exports may not push up export prices, but is likely to drive up raw materials prices. Secondly, exports will definitely boost imports of primary products such as crude oil and metals. The commodity prices rally on the international market will spread to domestic market via imports. Thirdly, the high export growth will also raise funds outstanding for foreign exchange and thus increase net release of RMB, which will heighten inflation pressure. According to estimates by the macro economy regulation department, if GDP, M2 and exports respectively grow by 10 percent, 18 percent and 10 percent, and international oil prices are set at 85 US dollars/barrel, the CPI growth will come to 2.4 percent in the first quarter, 2.9 percent in the second quarter, 2.8 percent in the third quarter and 2 percent in the fourth quarter. If the export growth rate rises to 20 percent, the CPI will hit 4.6 percent for the full year. So if the export growth maintains a growth above 20 percent in months to come, a hike in interest rate is more possible. --- Commodity futures prices Commodity futures prices have positive correlation with the spot prices. Domestic commodity futures market started a bull run from the end of 2008 thanks to restocking and inflation expectations. Though the actual demand was not sufficient, spot prices rose rapidly along with futures prices. Futures prices was correcting last month after hitting periodical high points. However, during the Spring Festival break (February 13 to 19), international crude oil and LME copper price rebounded. If the rebound develops into a new round of rise, inflation pressure will increase. Investors should pay close attention to primary product prices especially when they return to high points in January. --- Pork price growth Food takes up one third in China's CPI structure, with pork's proportion the highest. According to experts' estimates, if pork prices rise 15 percent, CPI will correspondently edges up about 1 percent. Data from the Ministry of Agriculture show that the country's pig stocks were 469 million in December of last year, up 0.67 percent from November and 1.32 percent from the end of that year. With such a slight growth rate, pork prices may grow rapidly in short term if some epidemic breaks out. (Edited by Liu Xiaoyun, liuxy08@xinhua.org)

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