International | May 16 2006
By Robert Rudnicki
If things were already looking tricky for Chinese policymakers then in the opinion of UBS economist Jonathan Anderson they just got trickier.
Several respected experts have been flagging the issue for some time now, including Singapore-based DBS, but this time it’s Anderson ringing the alarm bells.
The economist had already expressed concern following the release of March’s trade and credit data, pointing out that the country’s trade surplus was no longer falling and that credit growth was up on official targets, coupled with the view that liquidity controls had still to yield results.
Well if that wasn’t bad enough, Aprils’ data just made the situation even worse.
The trade surplus was once again higher, to a record of close to 10% of GDP, Anderson notes.
So what does this actually mean?
In UBS’ view we are likely to see more action on the renminbi exchange rate over the next 4-6 weeks, possibly new export restrictions, more forceful liquidity management measures and further consolidation in sectors with excess capacity.
What the trade surplus also means, Anderson says, is that it has become even less likely that action will be taken to slow domestic demand, which at least bodes well for commodity companies as demand is expected to remain buoyant.
