Strong China trade data point to rise in yuan

By Aileen Wang and Simon Rabinovitch

BEIJING (Reuters) - Chinese exports and imports grew faster than expected in February, underlining the momentum behind the world's third-largest economy and reinforcing the case for a rise in the yuan.

Economists cautioned against over-interpreting the figures, which were skewed by the timing of the long Lunar New Year holiday, but said the basic message was one of gathering strength that would justify a firmer exchange rate and further policy tightening measures to nip inflation in the bud.

Exports jumped 45.7 percent in February from a year earlier, following a 21.0 percent rise in January, while imports surged 44.7 percent after record growth of 85.5 percent in January, the General Administration of Customs said on Wednesday.

Jun Ma, chief China economist at Deutsche Bank in Hong Kong, said the data cemented his view that exports in 2010 could surge 30 percent, dwarfing Beijing's forecast of an 8 percent rise.

"Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening," Ma said.

China reported a trade surplus for February of $7.6 billion, compared with $14.2 billion in January.

Economists had expected an $8.0 billion surplus based on a 38.7 percent rise in exports and a 39.7 percent rise in imports from year-earlier levels.

"We think the very strong headline export growth will help to address concerns on the negative effect of any currency appreciation from some domestic quarters," said Wensheng Peng and Jian Chang at Barclays Capital in Hong Kong.