By Bloomberg News Feb. 10 (Bloomberg) -- China’s imports climbed for a third straight month in January, signaling increasing strength in domestic demand that’s aiding the global economic rebound. Imports climbed a record 85.5 percent from a year before, a jump that was influenced by a shift in the lunar new year holiday to February this year from January 2009, customs bureau figures showed in Beijing today. Exports rose 21 percent in a second monthly advance after 13 declines that may reinforce overseas calls for China to allow a stronger currency. Premier Wen Jiabao is trying to shift China toward relying on domestic demand after exports proved vulnerable during the global recession. Now, Germany’s BGA wholesale and export federation is counting on Chinese buyers to propel a 10 percent gain in German shipments abroad in 2010 and Taiwan posted the biggest export jump in 30 years due to its neighbor’s spending. “The global economic recovery, particularly in emerging markets, is buoying China’s exports,” said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong. “Even more important is China’s booming domestic demand, which is absorbing more imports.” Sun forecasts imports will grow 20 percent this year as exports climb 11 percent. Imports from Germany rose 50 percent in January from a year earlier, today’s data showed. China’s trade surplus slipped to $14.17 billion. The jump in overseas shipments was the biggest since September 2008, two months after the nation halted the yuan’s appreciation against the dollar. South Korea, Taiwan The nation’s appetite for imports is aiding Asian economies including South Korea, Taiwan and Japan, said David Cohen, an economist at Action Economics in Singapore. Japanese machinery orders surged 20.1 percent in December from record low a month earlier amid an export-led economic recovery, a Cabinet Office report showed today. China’s gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S. “It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman, chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today. Pressing on Yuan American officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the U.S. currency. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating global demand is only gradually improving. China’s export gain compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. Imports rose by the most since Bloomberg data began in 1991. Comparisons from a year earlier were also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent. “Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting, a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.” Currency Outlook Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6815 per dollar as of 1:13 p.m. in Hong Kong, indicating traders expect the currency to advance 2.2 percent against the dollar in the next year. An editorial in the state- owned China Securities Journal said the yuan may not have “big gains” in the first half to sustain a recovery in exports. Stocks pared advances after the trade report, with the MSCI Asia Pacific index up 0.3 percent after earlier rising as much as 0.8 percent. Seasonally adjusted, exports fell 5.5 percent from December and imports dropped 0.9 percent, the customs bureau said. Billionaire William Fung, the managing director of Hong Kong-listed Li & Fung Ltd., the world’s largest supplier of toys, clothes and furniture to retailers, said Jan. 27 that global demand seems to be recovering “very slowly, if at all.” In contrast, Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong, said today’s report shows that for China the “positive trend remains intact,” and bolsters the case for the government to tighten policies and let the yuan strengthen in coming months. Cooling Economy The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains would help China to restrain inflation. China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama. On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.” The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain. Shrinking Surplus Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said. Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers. Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang, the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy. A report tomorrow may show consumer prices increased 2.1 percent in January from a year earlier, the most since November 2008, according to the median forecast in a Bloomberg News survey of economists. Property price figures are also due this week. To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

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